What is the auditor’s job?
When auditors’ negligence is mentioned, lawyers inevitably think of Lord Denning’s ground-breaking dissenting judgment in Candler v Crane, Christmas & Co, which paved the way for establishing the principle that accountants owed a duty of care to third parties, and which was famously expounded in Caparo Industries Plc v Dickman. Since then, the principle has almost been taken for granted, and the courts have seen claims made against auditors not only by the companies that employed them, but also by directors, shareholders, potential investors and creditors. The courts have elaborated numerous tests of foreseeability, proximity and assumption of responsibility, and have adopted an incremental approach in an effort to curtail this tendency. The result has been that the position of auditors has been somewhat compromised by the uncertainty in the case law and the seemingly limitless liability imposed on them by statute. It is therefore useful to look, as a starting point, at the scope of an
