Liability to third parties, Auditing

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Liability to third parties

For long time liability to third parties existed only in respect to physical damage. Liability for financial loss is a current development.  Illustration of occasions whenever an accountant might run the risk of assuring a liability to third parties might comprise the following:

1) Preparing financial statements or reports for a client whenever it is known or ought to be known that they are planned to be shown to and relied upon by a third party even when the identity of the third party is not revealed.

2) Giving references concerning a client's credit praiseworthiness or a reassurance as to his capacity to take out the terms of a contract or offering any other reference on behalf of the client.

Again, it should be illustrated that the accountant was neglectful, third parties suffered a financial loss, the financial loss happened as a result of the accountant's negligence and that the accountant know the reason for which his report or accounts were to be employed.


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