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Generally, auditors nowadays are quick to issue standard unqualified opinion on financial statements due to the legal protection system. Moreover, although litigations are imposed to auditors, due to the limited liability, auditors are continuing with their tendency to issue the standard unqualified report.

5.4对审计师诉讼的需要——Example of legal protection system

According to the article entitled 'Auditors' liability-no need to detect fraud', the author concluded that fraudster is not supposed to sue his auditors for failing to detect his fraud. Applying ex turpi causa non oritur actio, if one is engaged in illegal activity, one cannot sue another for damages that arose out of that illegal activity. In the case Moore Stephens (a firm) v. Stone & Rolls Ltd. (in liquidation) [2009] UKHL 39, the House of Lords has decided that the illegality defense still applies. In other words, it is determined that Stone & Rolls Ltd could not rely on its own illegal acts to claim for damages from its auditor.

However, in our opinion, this principle 'ex turpi causa non oritur actio' cannot universally pardon auditors of a duty to detect fraud nor to totally protect them from any litigation. Auditors should undergo a fair trial and be judged reasonably if they were found guilty of conspiracy in the fraud case.

Additionally, co-operation between auditors and directors increase the tendency of auditors to issue the standard unqualified opinion. Modifications and adjustments are made for the benefits of management and auditors at the expense of shareholders.

As a result, apart from the effort to minimize the auditors' liability, in our opinion, there's still a need to impose appropriate legal actions on auditors who are involved in fraud cases because this is the right thing to do in order to maintain the fairness in the corporate world as well as to place emphasis on the importance of ethics and integrity in the profession.

5.5 总结和建议——5.5 Conclusion & Suggestions

Therefore, from our group's perspective, the current condition of auditors' liability indicates an imperative need to strike a balance between imposing litigation on auditors who commit fraud or who fail to comply with the approved auditing standards and minimizing auditors' legal liability at the same time.

In addition, auditors should be well aware of their real masters which are the shareholders. They should get on the job and reveal the fraudsters if any were found. Auditors should be carrying the burden of being accountable for pensioners' and investors' lost funds.

Our group believes that it is time to strike a change in the auditing industry. Auditors should chuck away their old habits and ensure that figures are appropriately presented. Moreover, auditors who had committed fraud should be blacklisted. Audit firms should be brave to accept blames and consequences whenever any fraud is found due to negligence of auditors.

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