Principle of Proximity and Foreseeability

Explanation:
The auditor owes a duty of care to a third party when the principle of proximity and foreseeability applies. This principle, established in legal cases, suggests that if it is reasonably foreseeable that a third party would rely on the auditor’s report and if there is sufficient proximity between the auditor and the third party, a duty of care may arise, even though auditors typically owe their duty to their client.