The common law liability of auditors to third party users of negligently audited financial statements is currently in a state of transition. For years, on the basis of Ultramares Corp. v. Touche, auditors successfully raised a lack of privity of contract with the plaintiff as a defense in negligence actions. Starting in the late 1960's, however, courts began to abandon the privity defense in favor of liability limited to actually foreseen third parties or foreseeable classes of financial statement users. Two recent cases manifesting the trend toward expanded auditors' liability held for the first time that negligent auditors can be liable to all reasonably foreseeable users.
Laurence E. Skinner,
Auditors' Liability - Adoption of a Reasonable Foreseeability Standard,
U. Rich. L. Rev.
Available at: http://scholarship.richmond.edu/lawreview/vol18/iss1/11