Final answer:
The distinction lies in the awareness of specific third-party users (actually foreseen) versus a broader group that could logically rely on the statements (reasonably foreseeable). An auditor's liability arises if these parties suffer losses due to the auditor's lack of due care in preparing financial statements.
Step-by-step explanation:
The legal concepts of actually foreseen third-party users and reasonably foreseeable third-party users pertain to auditor liability regarding people who use their financial statements but are not their direct clients. Actually foreseen third-party users are specific third parties whom the auditor is aware will rely on the financial statements. For instance, if an auditor knows that a particular lender will use the audited statements to decide on a loan, that lender is an actually foreseen user. In contrast, reasonably foreseeable third-party users are a broader group; they are not necessarily known individually by the auditor but are members of a limited class that the auditor could anticipate would rely on the statements, such as potential investors in a public securities offering.
The auditor's legal liability to these third parties comes into play if the auditor fails to exercise due care. If an actually foreseen or a reasonably foreseeable third party suffers a loss due to reliance on audited financial statements that contain material misstatements, the auditor could be held liable for damages. This is predicated on different legal theories of negligence or fraud, depending on the circumstances and the jurisdictions involved.