Auditor Liability

Part I of Essay
Throughout the Eighties and into the Nineties the question of liability has become more prevalent in the practice of public accounting. Recently, the AICPA has been lobbying for liability reform in cases involving negligence or malpractice by public accountants. Oppositio ....

Part II of Essay
.... argument as well as an economic argument to foster their point. The main components of their argument are as follows: Limiting recovery of loss has a detrimental effect on those which are harmed by alleged negligence. The cost of liability is reasonable when compared to total revenues, and in light of a CPA's public responsibility. Indemnity insurance spreads risk in the aggregate therefore removing the element of risk at the firm level. The threat of litigation provides public accountants with a deterrent against negl ....