Appeal Court Confirms Limited Auditor Liability for Economic Negligence
Date:
December 7 2004
In Waxman v. Waxman (2004 OJ No 1765) the Ontario Court of Appeal reaffirmed that auditors will not be liable to individual shareholders of their corporate client unless the mandate of the auditor has been specifically expanded beyond its usual role. A plaintiff must show that the auditor (i) knew that the shareholder would be relying upon the auditor for a purpose other than the customary audit retainer, and (ii) agreed to such an expansion of its mandate. Framing a claim as a 'failure to warn', or trying to distinguish the situation because the company is closely held, or the auditor-client relationship is of long standing, will not exempt a plaintiff from this burden of proof.
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