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Professional responsibilities and liability

3.4 Restricting auditor’s liability

 Restrict the use of the auditor's report and assurance reports to their specific,
intended purpose.

 Engagement letter clause to limit liability to third parties.

 Screening potential audit clients to accept only clients where the risk can be
managed.

 Take specialist legal advice where appropriate.

 Respective responsibilities and duties of directors and auditors communicated
in the engagement letter and auditor's report to minimise misunderstandings.

 Insurance – professional indemnity insurance (PII).

 Carry out high quality audit work.

 Take on LLP status.

 Set a liability cap with clients

Illustrations and further practice

Now try Exam style question from Chapter 8

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