LIMITING LIABILITY TO ESCAPE ACCOUNTABILITY: A COMPARATIVE ANALYSIS OF AUDITORS IN THE USA AND NIGERIA

Abstract

The auditing profession is saddled with a crucial role in financial markets. Auditors are the independent third parties that assure regulators, creditors, and investors about the accuracy of financial statements and whether such statements represent the accurate and fair view of the company’s financial position.  However, when auditors fail in undertaking this responsibility, as seen in cases of Enron in the United States and Cadbury Nigeria Plc’s overstating its financial statements, such failures can provoke a monumental financial and reputational damage that would undermine market stability and deplete public trust. Often, investors sue auditors for financial loss due to relying on the erroneous financial statements. In the face of this reality, auditors have increasingly called for legal reforms to limit their liability and save them from an existential threat. This article examines auditor liability legal and regulatory regimes in Nigeria and the United States. It analyses recent developments, and evaluates the legitimacy of liability limitation efforts. It proposes that while a degree of liability protection is necessary, it must not be used to avoid responsibility for professional failure.