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Abstract

Much of the previous literature relating to auditor liability has focused on individual issues in isolation. This paper aims to integrate the key issues, considering the rationale, cost and implications of the audit liability regime and overviewing the current calculus used to assess damages and reforms suggested to limit liability. It is submitted the current liability regime as it applies to auditors is too severe, inequitably imposing substantial costs on auditors. Consistent with recent literature, it is argued that a better solution would appear to be the introduction of a proportional liability regime accompanied by a mandatory requirement that directors hold professional liability insurance as well as reform to the calculus used to assess damages.

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