Final answer:
Auditors can be held liable for fraudulent misrepresentation to a limited class of foreseen third parties under the second restatement of the law of torts.
Step-by-step explanation:
The second restatement of the law of torts provides for an auditor's liability to a limited class of foreseen 3rd parties for fraudulent misrepresentation. This type of act refers to intentionally providing false information that others rely upon to their detriment. In the context of accountancy, auditors who knowingly issue false statements or recklessly disregard the truth in their reports can be held liable for fraudulent misrepresentation. Such a standard protects the interests of third parties that may reasonably rely on the auditor's professional assertions. It is important to distinguish this from strict liability, gross negligence, or ordinary negligence, which have different thresholds for establishing liability.