Auditors are considered as being legally answerable to both criminal and civil offences, which are are the main issues highlighted. Criminal offences are perpetrated when individuals or organisations infringe the terms of the government imposed law. Stated differently, criminal law conducts the policy, actions, affairs between entities and the sovereign state. Civil law, on the other hand is ideally a system of law bearing on the private relations among members of a community and or disputes between individuals or organisations.

Criminal offences

Individual or organisation auditors are required by the law of the countries in which they operate to abide by the prescribed systems of rules and regulations of such. With that being mentioned, current criminal law auditors can and in cases proven by evidence or argument will be prosecuted for acts such as fraud and insider trading (the illegal practice of trading on the stock exchange to one's own advantage through having access to confidential information.

An offence from the Companies Act 2006 “knowingly, or recklessly causing a report under section 495 (auditor’s report on company’s annual accounts) to include any matter that is misleading, false or deceptive in a material particular” is worth being accentuated. The reason being that auditors can be prosecuted in a criminal court for knowingly or recklessly issuing an inappropriate audit opinion; the fact that the said section stipulates the functions of auditors.

Civil offences

Civil law mainly comprises of the particular significance to the audit profession, contract law and the law of tort. All of which institutes the principles for auditor liability to clients and to third parties, respectively.

In light of contract law individuals or shareholders can pursue guidance or advice for failure in satisfying contractual agreements. There maybe cases where an auditor could be sued by the shareholders for negligence, duty of care and connected loss. In the event that there is a breach of duty of care towards a third party who suffers from loss an auditor becomes liable for such, however an auditor cannot be held responsible for losses that befall an enterprise a result of poor management decisions

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