Following the decision in Esanda Finance Corporation v Peat Marwick Hungerfords (1997)71 ALJR 448,to whom does an auditor owe a duty of care?
A)Anyone who reads the report.
B)Only to the company who commissioned the report.
C)Anyone who they know will rely on the report.
D)Anyone who buys shares in the audited company.

Question

Quizplus · Accepted Answer

According to the decision in Esanda Finance Corporation v Peat Marwick Hungerfords, auditors owe a duty of care to anyone who they know will rely on the report. This means that if an auditor is aware that a third party will be relying on their report, they owe that third party a duty of care. Therefore, the best choice is option C. Option A is incorrect because simply reading the report does not necessarily mean that the auditor owes a duty of care to that person. Option B is incorrect because the duty of care is not limited only to the company that commissions the report. Option D is incorrect because merely buying shares in the audited company does not necessarily mean that a person is relying on the auditor's report.

Following the Decision in Esanda Finance Corporation V Peat Marwick