Published audit reports add credibility to a company's published financial statements. This reduces the perceived risk of investment in the company, which benefits both the investor and the company itself. The fear of uninsurable liability has given rise to various proposals to limit auditors' liability for negligence, such as the imposition of a statutory cap. Some Australian cases have also treated plaintiffs harshly in their claims against auditors. This paper argues that auditors must be liable to parties who reasonably rely on their reports. This can be achieved fairly by legislation which imposes a duty of care on auditors towards general purpose users of published financial statements, and provides for proportionate liability between auditors and directors, and compulsory insurance for directors.