Failure to detect misstatement or disclosure errors – 41%.Comptroller General and International Financial Reporting Standards issued by the International Accounting Standards Board, as well as other industry and governmental regulatory requirements.įurther, the CNA Claims Database states that the audit and attest claims in 2019 were comprised of the following types of failures: Additional applicable professional standards may include: Generally Accepted Accounting Principles issued by the Financial Accounting Standards Board, Generally Accepted Auditing Standards (GAAS) issued by the Accounting Standards Board of the American Institute of Certified Public Accountants, Government Auditing Standards (GAS) issued by the U.S. The duty to be independent is the bedrock and primary professional standard in providing a quality audit. The potential legal liability in audit services is measured based on the degree of the auditor’s compliance with the professional standards that govern the profession and the work that the auditor performed. Ordinary negligence is the failure to exercise due professional care, including adherence to professional standards, and gross negligence is the absence of slight care in the performance of an auditor’s duties. Under tort law, an auditor may be liable to a customer for ordinary or gross negligence. In general, an auditor’s liability arises from the legal concept of privity, or a direct contractual relationship, and torts, or wrongful civil acts that result in injury to a person, property or reputation. Legal claims against auditors for audit and attest engagements are brought by both clients and third parties (lenders, vendors, investors, donors, customers or beneficiaries), according to the 2020 CNA Claims Database. By Bruce Bush, CPA, CFF - Senior Director at Fox Forensic Accounting

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