In modern society, auditors in both developed and developing countries have played a vital role in enhancing the corporate governance of the companies and establishing the confidence of users of companies' financial reports, especially investors . However, in recent years, while many corporate scandals and collapses, that were associated with auditors' fraud and negligence, have been unveiled, the auditors' legal liabilities became the bone of contention in almost every country . An increasing number of litigations against auditing practitioners have been lodged by the injured parties . Therefore, it is extremely necessary for auditors to understand their legal duties thoroughly, so that they can discharge their accountability properly. Meanwhile, the existence of an audit expectation gap between auditors and users of audited financial reports shows that users may over-expect auditors' performance and do not have clear idea about auditors' legal duties. Thus it is also necessary for these users to obtain basic knowledge about what legal duties are owed by auditors to them, so that they can use the rights granted by laws to protect their legal interests while auditors actually breach their duties owed.
Moreover, people who constitute, interpret or enforce the law, such as the Parliament and Judges, should also revalue the legal system about auditor's legal liabilities to ensure its fairness and equity.
In this essay, the discussion about auditors' legal liabilities will be divided into two main sections. To begin with, as the legal system in Australia, which was mainly inherited from English law system , is more advanced in this area, thus the auditors' legal liabilities in Australia will be analysed firstly. Secondly, the auditors' legal liabilities in China's modern legal system, which is still in the developing process, will be discussed. Some problems will be identified and possible solutions, which use strong...