ACCA Strategic Professional · Advanced Audit and Assurance (International) · Professional liability

A claimant sues an audit firm for negligence over a missed misstatement. To succeed in a claim of negligence against the auditor, which set of elements must the claimant establish?

The claimant must show the auditor owed a duty of care, that the auditor breached it by failing to meet the standard of a reasonably competent auditor, and that the breach caused a loss that was reasonably foreseeable. Dishonesty and contractual links are not required.

1. AA duty of care was owed, the duty was breached by falling below the required standard, and the breach caused a foreseeable lossCorrect
2. BThe auditor signed the report, the financial statements were wrong, and the client became insolvent
3. CThe auditor had a contract with the claimant, the audit fee was paid, and the report was modified
4. DThe auditor acted dishonestly, the claimant relied on the report, and the loss exceeded materiality