We have been considering the liability of an auditor to the company, the accounts of which he has audited the question arises, whether an auditor can be held liable for damages to third parties, if they have suffered any loss by relying on any balance sheet or any financial statement signed by him. It is a controversial legal questions. It is generally argued that an auditor does not owe any duty to the third party since he has not been appointed by them. There is no privacy of contract between the auditor and third party and therefore he has nothing to do with such party. It has been held in various cases that in the absence of a contractual relationship, a plaintiff cannot hold a suit against the auditor. It was decided in England in the case of candled vs. crane christmas and company 1951 that the auditor owes no duty of care to anybody but this client, and he cannot be held responsible for any loss suffered by third parties who relied on accounts which have been audited by him even though negligence may be proved. In this case, the auditor knew that the accounts certified by him would be used by the third parties and relying on the statements of accounts, the plaintiff did invest money in the company and it was lost. The majority judgement did not hold him responsible for negligence on the ground that there was no fraud though statements of accounts in question had been prepared negligently.
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