An auditor has a professional duty to conduct their work with due care, skill, and diligence, ensuring compliance with established auditing standards and regulations.
Auditor Negligence Claims
Auditors play a crucial role in ensuring financial transparency, providing independent assessments of a company’s financial statements. Investors rely on these audits to make informed financial decisions, trusting that the information provided is accurate and compliant with accounting and legal regulations.
Auditor negligence occurs when an auditor fails to exercise reasonable skill and care in preparing an audit, resulting in financial misstatements, undetected fraud, or regulatory breaches. If an investor suffers financial loss due to this negligence, they may be entitled to bring a professional negligence claim.
Where auditor negligence can occur
There are several ways an auditor may breach their duty of care, including:
• Failure to detect fraud
• Lack of professional scrutiny
• Breach of regulatory standards
• Misstatement of financial statements
• Conflicts of interest
For investors, negligent audits can have serious financial consequences. Relying on inaccurate audit reports can lead to misleading financial decisions, resulting in significant losses. If financial misstatements are later uncovered, share prices may decline, further impacting investment value. Investors who have placed trust in faulty financial statements may suffer substantial financial setbacks, and in some cases, regulatory investigations may follow, damaging market confidence and increasing scrutiny on affected companies.
Bringing forward an auditor negligence claim
If you have suffered financial loss due to an auditor’s negligence, you may be able to bring a professional negligence claim.
Key considerations when making a claim:
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Duty of Care: The auditor owed a duty of care to investors who relied on the audit
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Breach of Duty: The auditor failed to meet the professional standards expected of a reasonably competent auditor.
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Causation: The negligent audit directly contributed to an investor’s financial loss.
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Damages: A tangible financial loss resulted from the auditor’s negligence.
At Specters, we have successfully pursued claims against auditors where investors have suffered significant financial losses. Our team will assess your case, gather necessary evidence, and guide you through the legal process to help you recover compensation.
Our legal negligence solicitors
Frequently asked questions
Can I bring a claim if I relied on an audit report but was not the auditor’s client?
Yes. If you were an investor who relied on a negligent audit report and suffered financial loss, you may have grounds for a professional negligence claim, even if you were not the direct client of the auditor.
How can I fund my claim?
Specters offer no win, no fee arrangements for most auditor negligence claims. This means you can proceed with confidence, knowing you won’t face financial risk if your claim is unsuccessful.
What is the SAAMCO principle?
The law in relation to auditor negligence is complex and every-changing.
The SAAMCO principle is fundamental to such cases at it establishes that a professional advisor can only be liable for losses falling within their scope of duty of care, and not for all losses suffered by a client.
The case of AssetCo v Grant Thornton [2020] EWCA Civ 1151 reached the Court of Appeal on auditor negligence whereby Grant Thornton failed to detect fraudulent financial misstatements prepared by senior management in a company. The Court decided that negligent audits fell within the SAAMCO principle.
