An auditor’s liability and its limits

Copyright © 2025 LexisNexis
Published by a LexisNexis Corporate expert
Practice notes

An auditor’s liability and its limits

Copyright © 2025 LexisNexis

Published by a LexisNexis Corporate expert

Practice notes
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There are statutory provisions relating to the liability of an auditor of a company and the limits that may be placed upon it. Prior to 6 April 2008, a company could not exempt or indemnify its auditors from liability for any Negligence, default, breach of duty or Breach of trust in relation to the company occurring in the course of the audit of accounts. However, such exemption or indemnification is now permitted, provided it takes the form of an indemnity for the Costs of successfully defending proceedings or a Liability limitation agreement.

In addition, there may be other rules relating to the liability of an auditor and its limits that apply to a listed company, an AIM company or a company with securities that are listed on the AQSE Main Market, AQSE Growth Market or AQSE Trading (formerly NEX Exchange Main Board, NEX Exchange Growth Market and NEX Exchange Secondary Market), but these are outside the scope of this Practice Note.

Some or all of these statutory provisions may also apply to other companies and entities,

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Jurisdiction(s):
United Kingdom
Key definition:
Negligence definition
What does Negligence mean?

Negligence is 'the omission to do something which a reasonable man, guided upon those considerations which ordinarily regulate human affairs, would do, or doing something which a prudent and reasonable man would not do' (Blythe v Birmingham Waterworks (1856) 11 Exch 781, at p 784). It is accepted that the test for breach of duty is objective, in the sense that the individual character and mental and physical features of the particular defendant are usually irrelevant.

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