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The increase in litigation has brought about some negative effects. For instance, the litigation cost and cost of professional liability insurance of an audit firm has increased which will affect the ability and going concern of the audit firm, and increasing number of capable and experienced accountants leaving the profession which may lead to the issue of lack of accounting professionals in future. Unless action is taken, the future of auditing is under threat; this is clearly not in the public's interest (Ward, G., 1999).

As there are many negative effects from the litigation, many researches have been done and proposed that the auditor liability's scope should be limited to reduce the litigation risk of an audit firm. The most common suggestions include replacing of joint and several liabilities with proportionate liability, capping of auditor liability to a particular limit and so forth. The scope of auditor's liability is expected to be limited in future if the suggestions have been implemented. According to Pacini, C., Hillison, W. & Sinason, D. (2000), the trend of the legal liability of auditor to third parties has emerged towards a narrower scope.

2.1联合王国(英国)——2.1 United Kingdom (UK)

The issue of auditor liability in UK can be determined at the national level where the decision that binds on all the courts in the country is made at the highest national court.

Before 1964, it is relatively difficult for a third party to sue an auditor for negligent misstatements. However, the situation has change in 1964 due the case of Hedley Byrne & Co. vs Heller & Partners Ltd. (1964). After Hedley Byrne case, there was an apparent trend in the expanding of the scope of duty of auditor to third parties.

The case of Hedley Byrne generally provides certain tests that must be satisfied for extending the auditor's duty of care to third parties: (1) the auditor must aware that the financial statements are to be used for a particular purpose, (2) a known party was intended to rely on financial statements for that purpose, and (3) there must have been some conduct on the part of the auditor linking him to that party, which indicates the auditor's understanding of that party's reliance (Messier, W. F., 2007).

This case has brought about the concept of reliance where the auditor will be liable if they had been negligent in conducting audit and the third party had relied on the financial statements audited by them. For auditor to be liable to third parties, it must be reasonable for a third party to place reliance on the auditors' report and that the auditors were alert that the person would rely on the report.

Next, the case of JEB Fasteners Ltd. vs Marks Bloom & Co. (1981) and Twomax Ltd. and Goode vs Dickson, McFarlane & Robinson (1982) had emphasize on the concept of foreseeability which seems to lead to the view of unlimited auditor liability. The auditors should be able to anticipate that third party will use the audited financial statement as a guideline in decision making process. Both cases had resulted in the growing number of third parties which have a legal right to sue auditor for negligence. In other word, auditor's liability to third parties has increased.

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