Update: February 23, 2018 \n\nPreliminary analysis suggests the complicated ruling has public interest implications for the Canadian auditing profession and for the business community.\nLivent, a former theatre company, collapsed in 1998 amid accounting fraud by its founders. Livent, through its receiver, sued its auditor, Deloitte, for failing to discover the fraud. Two lower courts found the auditor negligent and liable for the losses before the case was heard by the Supreme Court in 2017. In a 4-to-3 decision, the high court found Deloitte liable for its audit of Livent’s 1997 statements, but not for its approval of a press release and comfort letter to investors. The amount of the trial reward was reduced to $40,425,000 from $84,750,000. The ruling is mute on the issue of resignation of the auditor.\nThe findings of the two earlier courts put into question the 1997 Supreme Court of Canada ruling in the Hercules Managements Ltd. v. Ernst & Young case and the issue of limited auditor liability. As such, there were concerns the Supreme Court ruling could lead to increased liability and higher insurance costs associated with providing auditing services and that those would be passed on to the business community and consumers. The loss of affordable and ready access to audit services would have serious implications for Canada’s businesses and investment community, especially higher-risk growth companies.\nCPA Canada intervened in the Livent case to ensure that issues affecting the broader public interest were fully considered. CPA Canada selectively intervenes in court cases to make certain that relevant facts and arguments are raised when the courts are making decisions affecting the profession’s mandate to act in the public interest.\nThe Supreme Court’s ruling affirmed that indeterminate liability for auditors is contrary to the public interest, and it upheld and restated the importance of the principles set out in Hercules.\nHowever, the SCC ruling may have the effect of expanding the circumstances when an auditor may be liable for their client’s losses, and expanding the type of losses for which the auditor may be liable.\nHere are more detailed perspectives of the ruling:\n\n Livent decision and the profession\n Auditor's duty of care to client upheld by the Supreme Court of Canada\n\n \n\n\nDecember 20, 2017 \n\nIn a 4-to-3 decision, the high court found Deloitte liable for its 1998 audit of Livent, but not for its approval of a press release and comfort letter to investors. The amount of the trial reward was reduced from $84,750,000 to $40,425,000. Among the three justices in dissent were the outgoing and incoming Chief Justices.\nThe profession is currently reviewing the ruling in depth and making a full assessment.\nThe complete ruling can be reviewed here.