Abstract
Social auditing refers to the practice of external assurance or evaluation of an organisation's socially responsible reporting assertions. Usually, the reporting frameworks organisations use, such as the Global Reporting Index, are voluntary codes of reporting. For auditors accepting an engagement to review or assure such social reporting, the appropriate standards may be similarly voluntary. It is only during this century that financial accounting and reporting has developed a universal set of standards for assurance work on such engagements. By briefly tracing the history of financial reporting audit standards from no regulation, to self-regulation, to mandatory regulation, this chapter highlights the challenges to regulation of social audit faced by auditors, and identifies issues pertaining to auditor liability on social audits. Discussions about potential liability can be a useful lens to critique proposed solutions.
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Quality standards and social auditing
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Social audit regulation, issues and challenges
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Notes
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425 U.S. 185 (1976).
- 2.
We have not included general criminal liability for fraud in this chapter. We are confining the scope to liability of auditors who carry out their routine functions—not liability of auditors who are dishonest, fraudulent or reckless.
- 3.
[1932] AC 562.
- 4.
In Daniels t/as Deloitte Haskins & Sells v AWA Ltd (1995) 16 ACSR 607, the end result was that the Court apportioned damage as 80 % contribution by the auditor and 20 % contribution by client management for the client firm’s loss a result of the audit failure.
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[1896] 2 Ch 279.
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[1895] 2 Ch 673.
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[1958] 1 WLR 45.
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[1925] Ch 407.
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Part 2 M.4 Div 3 Auditor Independence Corporations Act 2001 (Cth).
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Part 2 M.4 division 5 Auditor rotation for listed companies Corporations Act 2001 (Cth).
- 12.
Section 324CI Corporations Act 2001(Cth).
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Section 300(11B) Corporations Act 2001(Cth).
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(1970) 92 WN (NSW) 29.
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[1961] 2 All ER 167.
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(1992) 10 ACLC 933.
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(1997) 188 CLR 241.
- 18.
(1990) 8 ACLC 3,011.
- 19.
Global Reporting Initiative guidelines, Dow Jones Sustainability Index, ISO14000 (environmental) series.
- 20.
ISAE 3000 (Revised), Assurance Engagements Other than Audits or Reviews of Historical Financial Information International Framework for Assurance Engagements and Related Conforming Amendments, para 12. See also Hassan et al. (2005).
- 21.
(1931) 174 NE 441.
- 22.
(1997) 188 CLR 241, 249–254 (Dawson J), 271–272 (McHugh J), 301 (Gummow J).
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Acknowledgements
We thank colleagues Scott Hirst and YuYu Zhang for their helpful comments and support, and we are grateful to the anonymous reviewer for their insights that have helped focus the chapter’s contribution.
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Chapple, L.E., Mui, G.Y. (2015). Social Audit Failure: Legal Liability of External Auditors. In: Rahim, M., Idowu, S. (eds) Social Audit Regulation. CSR, Sustainability, Ethics & Governance. Springer, Cham. https://doi.org/10.1007/978-3-319-15838-9_14
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