Housing Development Agency Act, 2008
R 385
Auditing Profession Act, 2005 (Act No. 26 of 2005)Chapter IV : Conduct by and Liability of Registered Auditors46. Limitation of liability |
| (1) |
| (a) | The application of this section is limited to an audit performed within the meaning of paragraph (a) of the definition of "audit" in section (1). |
| (b) | Despite section 44(1)(a), for purposes of this section registered auditor means both the individual registered auditor and the firm referred to in that section. |
| (2) | In respect of any opinion expressed or report or statement made by a registered auditor in the ordinary course of duties the registered auditor does not incur any liability to a client or any third party, unless it is proved that the opinion was expressed, or the report or statement made, maliciously, fraudulently or pursuant to a negligent performance of the registered auditor’s duties. |
| (3) | Despite subsection (2), a registered auditor incurs liability to third parties who have relied on an opinion, report or statement of that registered auditor for financial loss suffered as a result of having relied thereon, only if it is proved that the opinion was expressed, or the report or statement was made, pursuant to a negligent performance of the registered auditor’s duties and the registered auditor— |
| (a) | knew, or could in the particular circumstances reasonably have been expected to know, at the time when the negligence occurred in the performance of the duties pursuant to which the opinion was expressed or the report or statement was made— |
| (i) | that the opinion, report or statement would be used by a client to induce the third party to act or refrain from acting in some way or to enter into the specific transaction into which the third party entered, or any other transaction of a similar nature, with the client or any other person; or |
| (ii) | that the third party would rely on the opinion, report or statement for the purpose of acting or refraining from acting in some way or of entering into the specific transaction into which the third party entered, or any other transaction of a similar nature, with the client or any other person; or |
| (b) | in any way represented, at any time after the opinion was expressed or the report or statement was made, to the third party that the opinion, report or statement was correct, while at that time the registered auditor knew or could in the particular circumstances reasonably have been expected to know that the third party would rely on that representation for the purpose of acting or refraining from acting in some way or of entering into the specific transaction into which the third party entered, or any other transaction of a similar nature, with the client or any other person. |
| (4) | Nothing in subsections (2) or (3) confers upon any person a right of action against a registered auditor which, but for the provisions of those subsections, the person would not have had. |
| (5) | For the purposes of subsection (3) the fact that a registered auditor performed the functions of a registered auditor is not in itself proof that the registered auditor could reasonably have been expected to know that— |
| (i) | the client would act as contemplated in paragraph (a)(i) of that subsection; or |
| (ii) | the third party would act as contemplated in paragraph (a)(ii) or paragraph (b) of that subsection. |
| (6) | Subsections (2) or (3) do not affect any additional or other liability of a registered auditor arising from— |
| (a) | a contract between a third party and the registered auditor; or |
| (b) | any other statutory provision or the common law. |
| (7) | A registered auditor may incur liability to any partner, member, shareholder, creditor or investor of an entity if the registered auditor fails to report a reportable irregularity in accordance with section 45. |
| (8) | A registered auditor may not through an agreement or in any other way limit or reduce the liability that such auditor may incur in terms of this section. |
