This dissertation recommends that the laws governing the liability of the auditor in South Africa be amended to ensure a sustainable audit function and accordingly a competitive market for audit firms. These amendments must take the form of (a) introducing a monetary cap or ceiling on the quantum of damages that may be claimed by a plaintiff in the event that an auditor is found guilty of a breach of his or her legal duties and obligations in contract and in delict, (b) the provision for auditors to enter into contracts with their clients to limit the quantum of damages that may be suffered by the client as a result of the auditor’s breach of the contract with his or her client, and (c) introducing legislation which, will protect audit partners from personal liability if they did not participate directly in another partner's misdeed or fraud. It is submitted that this dissertation should be viewed as a Revised Project 70 where the South African Law Commission in 1988 investigated the desirability of the limitation of professional persons and the possible regulation thereof by legislation [the conclusion was that there was no justification to limit the liability of any category of professionals by legislation]; which is updated with and including the fundamental and paradigm shifting changes that have taken place in the global markets since then regulators in Australia, United States of America, United Kingdom, Austria, Germany, Greece, Belgium, Slovenia and Australia have removed the prohibition on auditors limiting their liability in relation to work conducted within the statutory audit function. This dissertation explores and analyses whether these significant changes to the legal systems in the United States of America, European Union and Australia would be considered appropriate for implementation in South Africa. The main component of this dissertation is constituted by a comparative analysis of the different civil liability systems for auditors which currently exist in Australia, Germany, South Africa, the United Kingdom and the United States of America. The objective of the comparative analysis was to determine to what extent the different systems of civil liability of auditors which exist in Australia, Germany, United Kingdom and United States of America could be implemented in South Africa. [...]
Inhaltsverzeichnis (Table of Contents)
- CHAPTER 1 – INTRODUCTION
- 1. OVERVIEW
- 2. THE CASE FOR REFORM
- 2.1. Project 70 - Limitation of Professional Liability
- 2.2. Further Information
- 2.3. Financial Crises
- 2.4. Inherent Limitations of an Audit
- 2.5. Importance of auditor liability
- 3. RESEARCH PROBLEM AND RESEARCH QUESTION
- 3.1. Concerns
- 3.1.1.Concern 1
- 3.1.2.Concern 2
- 3.1.3.Concern 3
- 3.1.4.Concern 4
- 3.2. Summary
- 4. CONTRIBUTION TO KNOWLEDGE IN THE AREA OF RESEARCH
- 5. AIMS AND OBJECTIVES
- 6. RESEARCH METHODOLOGY
- 7. ASSUMPTIONS OF THE STUDY
- 8. LIMITATIONS OF STUDY
- 9. INTERNATIONAL JURISDICTIONS
- 9.1. Australia
- 9.2. Germany
- 9.3. United Kingdom
- 9.4. United States of America
- 10. STRUCTURE OF DISSERTATION
- 10.1.Chapter Two: Context and Policy Analysis
- 10.2.Chapter Three: Regulatory Framework: South Africa
- 10.3.Chapter Four: The Legal Liability of Auditors in South Africa
- 10.4.Chapter Five: Regulatory Framework: International Jurisdictions
- 10.5.Chapter Six: The Legal Liability of Auditors in International Jurisdictions
- 10.6.Chapter Seven: Comparative Analysis
- 10.7.Chapter Eight: Analysis of Proposals
- 10.8.Chapter Nine: Conclusions and Recommendations
- 11. SUMMARY
- CHAPTER 2 - CONTEXT AND POLICY ANALYSIS
- 1. OVERVIEW
- 2. THE AUDIT PROCESS
- 3. AUDITOR LIABILITY IN CONTEXT
- 4. POLICY ANALYSIS
- 5. SUMMARY
- CHAPTER 3 - REGULATORY FRAMEWORK: SOUTH AFRICA
- 1. OVERVIEW
- 2. THE COMPANIES ACT, 2008
- 2.1. Appointment of Auditor
- 2.2. Rights and Restricted Functions of Auditors
- 2.3. Collective Actions
- 2.4. Annual General Meeting
- 2.5. Civil Action
- 2.6. Independence
- 3. THE AUDITING PROFESSION ACT, 2005
- 3.1. Registration of Individual Auditors
- 3.2. Registration of Firms as Registered Auditors
- 3.3. Termination of registration
- 3.4. Conduct by and Liability of Registered Auditors
- 3.4.1.Practice
- 3.4.2.Duties in Relation to Audit
- 3.4.3.Duty to report on irregularities
- 3.5. Limitation of Liability
- 3.6. Accountability of Registered Auditors
- 3.6.1.Inspections
- 3.6.2.Investigation of Charge of Improper Conduct
- 3.6.3.Disclaimer of Liability by an Auditor
- 4. SUMMARY
- CHAPTER 4 - THE LEGAL LIABILITY OF AUDITORS IN SOUTH AFRICA
- 1. OVERVIEW
- 2. SOURCES OF THE AUDITOR'S DUTIES
- 3. CIVIL LIABILITY TOWARDS THE COMPANY
- 3.1. Performance Standard in Execution of Duties
- 3.2. Concept of Reasonable Care and Skill
- 3.3. What Constitutes Reasonable Care and Skill
- 4. RESPONSIBILITY FOR WORK OF TRAINEES
- 5. CLIENT COMPANY'S CIVIL REMEDIES AGAINST ITS AUDITOR
- 5.1.1.Actions Available
- 5.1.2.Breach of Contract
- 5.1.3.Delictual Action
- 5.1.3.1.Common Law Delictual Action
- 5.2. Breach of a Statutory Duty
- 5.3. Relevant Statutory Provisions
- 6. CIVIL LIABILITY TOWARDS THIRD PARTIES
- 6.1. General Principles For Common Law Delictual Liability
- 6.1.1.Conduct
- 6.1.2.Wrongfulness
- 6.1.3.Fault
- 6.1.4.Causation
- 7. STATUTORY DISPENSATION
- 7.1. When Liable and What Must be Established
- 8. AXIAM HOLDINGS LTD V DELOITTE & TOUCHE
- 9. CRIMINAL LIABILITY
- 9.1. Criminal Offence: Companies Act, 2008
- 9.2. Offences: Auditing Profession Act, 2005
- 10. SUMMARY
- CHAPTER 5 - REGULATORY FRAMEWORK: INTERNATIONAL JURISDICTIONS
- 1. OVERVIEW
- 2. AUSTRALIA
- 2.1. Function of Auditors
- 2.2. Statutory Requirements
- 2.3. Who May Be an Auditor
- 2.4. Registration Requirements
- 2.5. Forms of Practice
- 2.6. Cancellation and Suspension of Registration
- 2.7. Auditor Independence
- 2.8. Auditing Standards
- 2.9. Annual General Meeting
- 2.10.The Duty to Detect and Report Fraud and Irregularities
- 2.11.Collective Actions
- 2.12.Quality Control
- 3. GERMANY
- 3.1. Function of Auditors
- 3.2. Statutory Requirements
- 3.3. Appointment of Auditors
- 3.4. Registration Requirements
- 3.5. Forms of Practice
- 3.6. Cancellation and Suspension of Registration
- 3.7. Auditor Independence
- 3.8. Auditing Standards
- 3.9. Annual General Meeting
- 3.10. The Duty to Detect and Report Fraud and Irregularities
- 3.11. Collective Actions
- 3.12.Quality Control
- 4. UNITED KINGDOM
- 4.1. Function of Auditors
- 4.2. Statutory Requirements
- 4.3. Appointment of Auditors
- 4.4. Registration Requirements
- 4.5. Forms of Practice
- 4.6. Cancellation and Suspension of Registration
- 4.7. Auditor Independence
- 4.8. Auditing Standards
- 4.9. Annual General Meeting
- 4.10.The Duty to Detect and Report Fraud and Irregularities
- 4.11.Collective Actions
- 4.12.Quality Control
- 5. UNITED STATES OF AMERICA
- 5.1. Function of Auditors
- 5.2. Statutory Requirements
- 5.3. Appointment of Auditors
- 5.4. Registration Requirements
- 5.5. Forms of Practice
- 5.6. Cancellation and Suspension of Registration
- 5.7. Auditor Independence
- 5.8. Auditing Standards
- 5.9. Annual General Meeting
- 5.10.The Duty to Detect and Report Fraud and Irregularities
- 5.11.Collective Actions
- 5.12.Quality Control
- 6. SUMMARY
- CHAPTER 6 - THE LEGAL LIABILITY OF AUDITORS: INTERNATIONAL JURISDICTIONS
- 1. OVERVIEW
- The legal framework governing auditor liability in South Africa.
- The current state of the law regarding auditor liability in South Africa.
- The potential for reform of auditor liability in South Africa.
- The regulatory frameworks governing auditor liability in other jurisdictions.
- The legal liability of auditors in other jurisdictions.
Zielsetzung und Themenschwerpunkte (Objectives and Key Themes)
This dissertation aims to explore the limitation of an auditor's liability in South Africa. It aims to examine the legal framework governing auditor liability, the current state of the law, and the potential for reform. The research also analyzes the regulatory frameworks and legal liability of auditors in various international jurisdictions, including Australia, Germany, the United Kingdom, and the United States. By comparing and contrasting these different approaches, the dissertation aims to provide a comprehensive overview of the challenges and potential solutions to the issue of auditor liability.
Zusammenfassung der Kapitel (Chapter Summaries)
Chapter 1 provides an introduction to the research topic, outlining the case for reform in the area of auditor liability. The chapter examines the inherent limitations of audits, the importance of auditor liability, and identifies key research concerns and questions. Chapter 2 examines the context and policy analysis surrounding auditor liability, including an overview of the audit process and its role in corporate governance. The chapter explores the potential consequences of limited auditor liability on corporate governance, regulatory regimes, and investor confidence. Chapter 3 delves into the regulatory framework governing auditor liability in South Africa, analyzing relevant legislation such as the Companies Act, 2008, and the Auditing Profession Act, 2005. The chapter discusses key provisions related to auditor appointment, rights, duties, and accountability, as well as the current state of statutory limitations on liability. Chapter 4 examines the legal liability of auditors in South Africa, exploring the sources of their duties, civil liability towards the company, responsibility for the work of trainees, and the availability of legal remedies for the client company. The chapter also examines the potential for civil liability towards third parties and the statutory dispensation for limiting liability. Chapter 5 provides an overview of the regulatory frameworks governing auditor liability in international jurisdictions, focusing on Australia, Germany, the United Kingdom, and the United States. The chapter examines the functions of auditors, statutory requirements, registration processes, auditor independence, auditing standards, and the duty to detect and report fraud and irregularities in each jurisdiction. Chapter 6 examines the legal liability of auditors in these international jurisdictions, comparing and contrasting the different approaches taken to address the issue of auditor liability. The chapter analyzes the legal framework, common law principles, and specific statutory provisions governing auditor liability in each jurisdiction. The dissertation aims to provide a comprehensive analysis of the legal and regulatory landscape of auditor liability in South Africa and other jurisdictions, contributing to the ongoing debate regarding the appropriate balance between protecting investor interests and encouraging auditor independence. The research will provide insights into the challenges and potential solutions to the issue of auditor liability, and its implications for corporate governance and financial stability.
Schlüsselwörter (Keywords)
This dissertation focuses on the key concepts of auditor liability, legal frameworks, regulatory regimes, corporate governance, and investor confidence. The research explores the interplay between these concepts in the context of South Africa and international jurisdictions, examining the potential for reform and the challenges associated with balancing the interests of investors, auditors, and the public. The analysis incorporates relevant themes such as limited liability, professional negligence, fraud detection, auditing standards, and the role of legal frameworks in mitigating financial risk. The dissertation examines the legal landscape of auditor liability in South Africa and provides insights into the current state of the law, the potential for reform, and the challenges of balancing competing interests in the context of a globalized financial system.
- Citation du texte
- Steven Firer (Auteur), 2013, The Limitation of an Auditior's Liability in South Africa, Munich, GRIN Verlag, https://www.grin.com/document/315158
