question archive It is difficult for creditors to successfully claim damages from an auditor
It is difficult for creditors to successfully claim damages from an auditor
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It is difficult for creditors to successfully claim damages from an auditor. This is because:
A. The corporate veil of incorporation ensures there is only a relationship between auditor and shareholders
B. legal cases have demonstrated that creditors rank equally with shareholders when a company is wound up.
C. An audit opinion does not, of itself, induce a third party to act
D. Creditors cannot adequately quantify the loss or damage suffered
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Correct Option is:
- C. An audit opinion does not, of itself, induce a third party to act
Step-by-step explanation
It is difficult for creditors to successfully claim damages from an auditor because auditor expresess his opinion of the company ased on facts and figures produced to him and by applying analytical procedures. So, the opinion of audtor cannot induce a third party to act like creditor cannot claim damages from auditor.
