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

Tessin & Partners audits Alder Group. A third party sues the firm for negligent misstatement. Tessin's engagement was staffed by a competent team, but the firm's own review shows that the going concern evidence was weak and the opinion was unmodified. Alder's directors also concealed key information, and the court finds both the directors and the auditor partly at fault. In a jurisdiction with proportionate liability, what is the most likely consequence for Tessin?

Under proportionate liability, Tessin pays only the share of the loss that reflects its own responsibility, so the directors' concealment reduces its share. It is not fully excused, since its own audit work was deficient, and insurance does not alter the extent of liability.

1. ATessin is liable for 100% of the loss regardless of the directors' fault
2. BTessin is liable only for the share of loss the court considers it responsible for, reflecting the directors' contributionCorrect
3. CTessin has no liability because the directors concealed information
4. DTessin's liability is reduced to zero if it holds professional indemnity insurance