ACCA AAA Practice Questions - ACCA Advanced Audit And Assurance (AAA) Exam

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An audit firm is concerned about potential professional liability following a negligence claim by a third-party lender who relied on audited financial statements. Which principle, established in case law such as Caparo Industries v Dickman, most limits the auditor's exposure to third parties?

A duty of care requires proximity and that reliance was reasonably foreseeable for a known purpose Auditors owe a duty of care to anyone who foreseeably might read the accounts Auditors are strictly liable for any loss arising from a material misstatement Liability can never be limited by any agreement or disclaimer

Correct Answer:

A duty of care requires proximity and that reliance was reasonably foreseeable for a known purpose

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