Effect of Audit Regulations and Litigation on Auditors’ Liabilities: A Subjective Approach

Abstract

In this review, we take a theoretical look at how audit regulation and litigation have changed the liability landscape for auditors. In order to increase transparency and trust in financial reporting, auditing is a crucial public service. The auditing industry has received a lot of attention, some of it unfavourable, as a result of scandals like Enron and WorldCom in the United States or Parmalat in Europe or Cadbury Nigeria PLC. People all throughout the world have spoken out to demand better audit quality. Due to this, adjustments have been taken to increase audit openness and auditor accountability. However, there is still a need for enhancements to be made. This leads to inquiries into the different requests and concerns, and the extent to which they may be fulfilled (auditors' responsibility). Auditors are put in a difficult position since they are expected to please both shareholders and other interested parties. When it comes to the auditor's responsibilities, each stakeholder group has different priorities and requirements. Several ideas have been developed since the field's inception that attempt to pin down audit's precise purposes. Findings of the study has revealed that regulations and litigations have significant positive and adverse effect on auditors’ liability and the expectations of the stakeholders as a result of audit expectation gap. The conclusion here is that, audit regulations and litigation have a significant relationship with auditors’ liability. Irrespective of the outcome of audit litigations as a result of auditors’ negligence to duty, there is an impact on the affected organizations. Therefore, auditors should carefully practice in accordance with national and international auditing standards in order to sustain the good reputation of the organizations.