An auditor faces various liabilities for negligence or misconduct in performing their duties. They can be held civilly liable for damages caused by negligence in auditing, such as failing to detect errors or fraud. Auditors are also liable for misfeasance, which is a breach of duty or trust that causes loss to the company. Under company and tax laws, auditors can face criminal liability for misstatements, falsifying documents, or assisting with tax evasion. They may also face penalties for professional misconduct from regulatory bodies like the ICAI. Finally, auditors could be liable to third parties like creditors or shareholders who rely on inaccurate financial statements in their dealings with the company.
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Are you Searching for the information about Vouching?Here is the brief explanation about how to vouch few items and can gain knowledge within Short time...
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A lecture summarising the law of De facto/Shadow Directorship and interface with legislation on Disqualification of Directors. The lecture covers the position of law in the United Kingdom and Nigeria.
IT CONTAINS BASICS OF AUDIT AND AUDITOR
MEANING OF AUDIT, DEFINITION, ORIGIN AND DEVELOPMENT, TYPES OF AUDIT, DIFFERENCE BETWEEN ACCOUNT AND AUDIT, AUDITOR
IT WILL HELP THE STUDENTS TO UNDERSTAND THE BASIC OF AUDIT.
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Have you ever heard that user-generated content or video testimonials can take your brand to the next level? We will explore how you can effectively use video testimonials to leverage and boost your sales, content strategy, and increase your CRM data.🤯
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3. How you can capture more CRM data to understand your audience better through video testimonials. 📊
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https://viralsocialtrends.com/vat-registration-outlined-in-uae/
Recruiting in the Digital Age: A Social Media MasterclassLuanWise
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In the Adani-Hindenburg case, what is SEBI investigating.pptxAdani case
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https://www.productmanagementtoday.com/frs/26903918/understanding-user-needs-and-satisfying-them
We know we want to create products which our customers find to be valuable. Whether we label it as customer-centric or product-led depends on how long we've been doing product management. There are three challenges we face when doing this. The obvious challenge is figuring out what our users need; the non-obvious challenges are in creating a shared understanding of those needs and in sensing if what we're doing is meeting those needs.
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3. 1. Civil Liability:
1. Liability for Negligence:
A person who is appointed an auditor, he should perform his duties by using the
reasonable skill and diligence. If the auditor is found negligent in performing his duty
then he may be sued in the Civil Court for damages.
Negligent liability arises when the auditor has been negligent in examining the book
of account. He is also liable if he fails to detect deflections or does not discover the
errors which he should discover. Because he fails to exercise a reasonable care and
skill in the performance of his duties.
i. Liability In Case Of Loss:- Auditor will be liable to compensate the loss which is
suffered by the client due to his negligence.
ii. Liability Case Of No Loss:- The auditor will not be held liable if no loss is
suffered by the client even auditor is proved to be negligent.
iii. Legal Case:-
Leeds Estate Building Society vs Sphephered 1887: In this case auditor did not care
to see the provisions of carried out articles. Profits were inflated by including the
fictitious terms. Due to the auditors, negligence dividends were paid out of capital.
The action was taken by the company and auditor was held liable for damages.
4. 2. Liability for Misfeasance:
Misfeasance means the breach of duty breach of trust involving the company in the
loss. The company may proceed against the auditors by way of a regular suit in
case of misfeasance. The company can claim damages suffered. Misfeasing
proceedings can be taken against die auditor by the directors. Promoters,
managing agents when the company is in liquidation.
Generally, misfeasance liability arises in the case of winding up a company.
2. Liabilities under Companies Act
The following are the liabilities of an auditor under the provisions of the Companies
Act.
(i) Liability for Misstatements in the Prospectus [Sec.35]:
An auditor shall be held liable to compensate every person who subscribes for any
shares or debentures of a company on the faith of the prospectus containing an
untrue statement made by him as an expert. The auditor shall be liable to
compensate him for any loss or damages sustained by him by reason of any untrue
statement included therein.
6. 3. Criminal Liability under Indian Penal Code
If any person issues or signs any certificate relating to any fact which such
certificate is false, he is punishable as if he gave false evidence. According to
Sec.197 of the Indian Penal Code, the auditor is similarly liable for falsification of
any books, materials, papers that belongs to the company.
4. Liability under Income Tax Act [Sec.278]
· For tax evasion exceeds ₹.1,00,000, rigorous imprisonment of six
months to seven years.
· A person who induces another person to make and deliver to the Income
Tax authorities a false account, statement or declaration relating to any income
chargeable to tax which he knows to be false, he shall be liable to fine and
imprisonment of three months to three years. An auditor may also be charged in
case of wrong certification of account.
· A Chartered Accountant can represent his clients before the Income Tax
Authorities. However, if he is guilty of misconduct he can be disqualified from
practicing.
· An auditor can face imprisonment upto two years for furnishing false
information.
7. 5. Liability for Professional Misconduct
The Chartered Accountant Act, 1949 mentions number of acts and omissions that
comprise professional misconduct in relation to audit practice. The council of ICAI
may remove the auditor’s name for five years or more, if he finds guilty of
professional misconduct.
6. Liability towards Third Parties
There are number of persons who rely upon the financial statements audited by the
auditor and enter into transactions with the company without further enquiry viz.
creditors, bankers, tax authorities, prospective shareholders, etc.
(i) Liability for Negligence
(ii) Liability for Frauds: