Abstract The article presents a reply by James A. Anderson and Kent E. St. Pierre to a comment on the article "The Potential Impact of Knowledge of Market Efficiency on the Legal Liability of Auditors," regarding market efficiency and legal liability. In their comments on the above mentioned subjects the authors have given importance to some points. The important ones being 1) Speculation: The original paper was concerned with the direction of probable change in court decisions that might be caused by knowledge of market efficiency. 2) Criticism of earlier focus on common law; 3) Damages. Each of these categories are discussed briefly. Under the general heading of Auditors' Legal Liability Under the Common Law, critics have discussed both negligence and deceit. Theft analysis of liability for negligence focuses on the principle of privity of contract and concludes that "the common law courts are a long way from abandoning the notions of privity of contract, primary benefit, and foreseen persons (classes) and will likely continue to hold accountants liable in negligence only to those clearly foreseen third parties whose injuries are directly linked to the accountants' misrepresentation."
Anderson et al. (Sat,) studied this question.
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