Law.

Economics
December 25, 2020
What are the features of the legal liability system in auditing in the EU?
December 25, 2020

Assume that accounting firm XYZ has issued an unqualified opinion on the financial statements of Field Company for a particular year, which contained a material misstatement. In the subsequent year, the company sustained significant operating losses, and the stock price went down by 60 percent whereas the market index declined by only 10 percent. An investor, who held a considerable amount of the company’s stock for the last three years, was obliged to sell the shares at a substantial loss. The investor had reason to believe that the financial statements were misstated before purchasing stock in Field Company. On this basis, he is suing the audit firm and seeking to recover his loss from the auditor. Discuss the above situation. What arguments might the investor and auditor use for defending their cases?