Auditor's liability towards third parties within the EU: A comparative study between the United Kingdom, the Netherlands, Germany and Belgium.

Auditors' liability is a hot topic nowadays. Due to the increased risks of auditors and the lack of appropriate insurance, a limitation of auditors' liability seems appropriate. Based on the economic study of the London Economics, the European Commission issued a consultation paper to discuss a European harmonization of auditors' liability. But to harmonize a liability cap on auditors, one needs to examine not only the economic implications, but also the legal restraints and differences of auditors' liability regimes within the European Union. This paper shows that there are large discrepancies concerning auditor's liability towards third parties within the legal systems of the European Union. In Belgium, an auditor is liable towards each interested party. However, the public role of an auditor is not acknowledged in the United Kingdom, the Netherlands and Germany. In those countries the purpose of audited statements is to fulfil the auditor's duty to the shareholders collectively and not to the stockholders as individual parties or third parties. In Germany, the Netherlands and the United Kingdom, an auditor has to encompass a special duty of care towards the third party to be liable. Only a special relationship of the auditor towards a third party could imply auditor's liability toward those parties. This element wasn't discussed in the London Economics Study. However, these findings could have a major impact on the debate to harmonize an auditor's liability cap because the more parties can pursue an auditor, the more damage can be claimed and the higher the liability cap needs to be fixed. [ABSTRACT FROM AUTHOR]