Auditors' Third Party Liability: An Ill-Considered Extension of the Law

Authors

Joseph P. Dawson

Abstract

Numerous legal commentators have recently advocated an extension of auditors' professional liability to third-party users of financial statements, with the dual purposes of inducing improved disclosure in financial statements and obtaining restitution for investors injured by misleading statements, and some judicial decisions have adopted such an expanded liability. This comment evaluates the probable effectiveness and effects of such expanded liability, concluding that the expansion is unlikely to obtain either of its stated objectives and that such an expansion is likely to create pressures upon the cost and availability of audits which will be injurious to both investors and users of capital and will impede the resource-allocating capability of the economy.

First Page

675

Recommended Citation

Joseph P. Dawson, Comment, Auditors' Third Party Liability: An Ill-Considered Extension of the Law, 46 Wash. L. Rev. 675 (1971).
Available at: https://digitalcommons.law.uw.edu/wlr/vol46/iss4/3