Abstract
Since the emergence of the profession, auditors’ liability is recognized as a controversial and loose debating matter (Flores, 2011). This everlasting issue not only differs among contexts but also differ among the lawsuits. Consequently, as an essential step, this research endeavors to provide a full understanding of the extent and nature of auditors’ legal liability according to the Jordanian relevant regulations. To do so, the authors gain a full capture of the regulation through a qualitative-analytical study. Consequently, the authors found that in Jordan auditors are subject to different standards of proof before the judiciary. Therefore, judges in Jordan are bound to understand the peculiar technical-legal nature of auditors’ liability. Although the Jordanian regulations state clearly that an auditor is obliged to compensate for any realized damage or lost profit incurred as a result of errors committed by him/her, it must be borne in mind that lost profit is not recognized, and therefore, not entitled to compensation under the Jordanian Contract Law. In some cases, auditors’ liability might be increased to one of fitness for intended purposes, instead of reasonable care. Undoubtedly, this paper has serious legal implications in construing the wording of legal provisions and ensuing obligations and liabilities thereof.
Highlights
The discussion on what might be considered as an auditor wrongdoing is wide (Arena & Azzone, 2009; Gold, Gronewold, & Pott, 2012)
Failure to comply with the enforced auditing standards is a major type of audit failure that might result in sever legal sanctions
In the efforts for safeguarding the auditors, international regulatory authorities such as the Public Company Accounting Oversight Board (PCAOB) and International Auditing and Assurance Standards Board (IAASB) have issued multiple standards to guide the professional in conducting high quality auditing
Summary
The discussion on what might be considered as an auditor wrongdoing is wide (Arena & Azzone, 2009; Gold, Gronewold, & Pott, 2012). Auditors in a developing country context face challenges regarding compliance with the international audit standards. This situation is greater in the Jordanian context (Abdullatif, 2016; Abdullatif & Al‐Rahahleh, 2020; Farooq, Kazim, Usman, & Latif, 2018). The case law on auditors’ liability in Jordan is very limited. This reflects the scarcity of litigation in Jordan with regards to this vital issue. The authors of this paper will take a speculative approach, which might be utilized by Jordanian judges on this matter
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