What can a company enter into with an auditor to limit negligence liability?

A company can enter into a liability limitation agreement with an auditor to address and potentially limit negligence liability. This type of agreement typically outlines the responsibilities of both parties and may specify the extent to which the auditor can be held liable for errors or omissions in their work, provided that such limitations are permissible under applicable law.

The rationale behind this type of agreement is to provide clarity and predictability regarding potential liabilities, which can enhance the relationship between the auditor and the company, while also allowing the auditor to manage the financial risks associated with their profession.

Other agreements mentioned, such as performance bonds, confidentiality agreements, and non-disclosure agreements, serve different purposes. A performance bond is typically used in construction and contracting situations to guarantee that obligations will be met, rather than dealing directly with liability limitations in auditing. Confidentiality agreements and non-disclosure agreements focus on protecting sensitive information exchanged between parties rather than limiting liability for negligence. Therefore, the liability limitation agreement is specifically designed to address the nuances and implications of professional liability in auditor-client relationships.