Minimising auditor’s legal liabilities

1) Limited liability to involve a contractual and contributory negligence limit.
2) Joint and several liability to be removed in favour of proportional liability according to name not ability to pay.
3) Lawyer of losing party to pay legal costs of winning party (―fee shifting‖) to prevent ready acceptance of litigation cases.
4) Refrain from out of court settlements.
5) Prevent incorporation of audit firms. Discourage avoidance of high risk clients by following professional ethics.
6) Use engagement letters to define tasks and responsibilities undertaken by client and auditor
7) Use clauses disclaiming liability to third parties.
8) Attempt to limit the use of documents to the purposes for which they are prepared for: identifying authorised recipients, stating the purposes of the report and stating that it may not otherwise be relied on.
9) Obtain indemnity from the client or third party e.g. obligate the client or third party to indemnify the author from third party claims but do not limit the third party‘s liability to assert their claims.
10) Take steps to restrict use or citing of firm‘s name.
11) Liability to assert their claims.

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