AUDITORS LEGAL

LIABILITY
Ahmad Dzakiyuddin
12010013

Liability Under
Common Law

- Liability to Clients
- Liability to Third
Parties
- Common Law
Defenses

Liability Under
Security Law

Other

- Security Act of 1933

- Security Exchange
Act of 1934
- Litigation Reform
Act 0f 1995
- SOX of 2002

- Liablity Under
Racketeer
Influenced and
Corrupt Org. Act
- Minimizing the Risk
of Litigation

1. Liability Under Common Law

Common law is derived from principles based on justice, reason, and
common sense rather than absolute, fixed, or inflexible rules.
The principles of common law are determined by the social needs of
the community.

Liability to Clients :

Suit in
Contract

Suit in Tort

Based on privity and the auditors

alleged breach of agreement.
This source doesnt apply to third
parties (nonclients).
Based on negligence, gross negligence,
or fraud.

(Natawidnyana, ____ )

 Ordinary Niglegence (kelalaian biasa) Ketiadaan kepedulian

(reasonable care) dari seseorang yang diharapkan dari seseorang
dalam situasi tertentu.
Gross Niglegence (kelalaian besar) Tidak adanya sedikitpun
kepedulian (lack of event slight care), atau suatu tindakan sembrono
dari seseorang yang diharapkan.
Fraud (kecurangan) terdapat misstatement, misrepresentation,
diketahui dan disengaja untuk menipu.

Liability to Third Parties:

An individual who is not in privity with the parties to a contract.

Primary
benificiary

Is anyone indentified to the auditor

by name prior to the audit who is to
be the primary recipient of the
auditors report.

Other
beneficiaries

Unnamed third parties: creditors,

stockholders, and potential investors.

2. Liability Under Security Law

Securities Act of
1933
Securities
Exchange Act of
1934

Applies to the initial distribution of securities (cap.

Stock&bonds) to the public by the issuing corporation.
The primary purpose of the 1933 Act is to ensure that
buyers of securities receive complete and accurate
information before they invest (Wikipedia, 2014).

Applies to the initial sale and trading of securities for

national security markets.

Plaintiff

1993 Act

1934 Act

Any person acquiring

the security

Either the buyer or

the seller of the
security
YES

Plaintiff must prove

NO
reliance
Defendant liability for YES
ordinary negligence

NO