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By law, auditor will be liable for their negligence as if they do not exercise due care while conducting an audit. However, when judges tend to believe that auditors purposely breach its professions and professional requirement, they may make wrong judgments while determining the liability of auditor.

To reduce the auditors' liability, accounting profession has enacted the audit standards to expand auditors' responsibilities to reduce the number of audit failures. However, these efforts will not help a lot as if they are done alone. Most importantly, we have to debias the judges in their decision making process.

There are lots of methods that have been used to debias or to reduce the judgment errors. That is because judges play important roles in controlling important element of the trial. For example, there are some specific methods designed for judges to determine the liability borne by auditors. Therefore, a correct judgment can be reached. However, in reality, judges do not really believe in due diligence of auditor because of the increase in number of corporate scandals in recent years.

Despite the bias view by judges, UK government has talk on contributory negligence to reduce the liability against negligent auditors. In addition to that, US Private Securities Litigation Reform Act enabled auditors to have negotiation on proportional liability so as to protect auditors from their liability towards shareholders.

However, the enforcement of those acts seems to be the main reason behind US audit failures. It is claimed that auditors are given substantial protection. That is because the situation has made the investor has no way to sue parties like law and accounting firm which may get involved in fraudulent activities (Anderson. J.C, Jennings. M.M, Lowe.D.J, Reckers.M.J , 1997).

3.4 从股东角度看——3.4 Shareholder Perspective

Auditor needs to give absolute opinion rather than reasonable opinion on financial statements

To reduce the power of manipulation of directors, auditors are indirectly becoming the agent appointed by shareholders to be independent parties of company and directors. Yet, shareholders at the same time doubt the independent of the auditors while they carry out their audit work. That is because they do not know the extent of the auditors' honesty and integrity (Sikka.P, Filling.S, Pik Liew, 2009).

However, as shareholders are constrained by lots of liability arrangement which can safeguard auditors' professions, shareholders hold on to the opinion that auditors hold the responsibility to discover any irregularities in the company and any inconsistency raised. Therefore, auditor holds a responsibility that they have to be able to assess the effectiveness of the internal control inside the corporation, supported with relative substantive procedures within a short audit period. After carrying out all the audit work, it is the responsibility of auditor to reach to an accurate conclusion, especially those concerning financial difficulties and going concern of the client's company.

Auditors are liable for shareholders in respect of the truthfulness of the presentation of financial statement. Their liability is going to be heavier because of the increase of complexity of the accounting environment and practices (Sikka.P, Filling.S, Pik Liew ,2009).

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