Commentary Part 16: Audit Chapter 6: Auditors’ Liability
816.This Chapter makes it possible for auditors to limit their liability by agreement with a company, but the agreement will be effective only to the extent that it is fair and reasonable.
817.It achieves this by defining a “liability limitation agreement” – a contractual limitation of an auditor’s liability to a company, requiring member agreement – as a new exception to the general prohibition, restated here, on a company indemnifying its auditor. The court will be able to substitute its own limitation if the agreement purports to limit liability to an amount that is not fair and reasonable in all the circumstances.