Legal liabilities of auditors may arise from lawsuits brought on the basis of the law of contracts or as tort actions.

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Legal liabilities of auditors can arise from lawsuits brought on the basis of both contract law and tort actions. Under contract law, auditors may be held liable for breach of contract if they fail to perform their services in accordance with the terms of their engagement letter or fail to comply with professional auditing standards. Under tort law, auditors may be held liable for negligence or fraud if they fail to exercise reasonable care in their audit work or if they make material misstatements in their audit report.

Legal Liabilities of Auditors May Arise from Lawsuits Brought on the Basis