Auditor liability limitation agreement
A liability limitation agreement seeks to limit an auditor’s legal liability to a client for specified work, subject to applicable law, professional requirements and the engagement. Its effectiveness and fairness vary by jurisdiction and circumstances; it does not permit the auditor to disregard standards or issue an unsupported opinion.
Worked example
An audit firm and client consider a proposed contractual cap and obtain advice on whether local law permits the terms.
Common mistake
Do not assume every liability cap is enforceable or that an agreement automatically eliminates liability to third parties.
Where it appears in your exams
| Qualification | Exam | Relationship | Period |
|---|---|---|---|
| ACCA | AAA (INT) | Supporting | September 2026–June 2027 |