Whom is the external auditor primarily accountable to?

The external auditor is primarily accountable to the shareholders of the company. This relationship is grounded in the fundamental purpose of an external audit, which is to provide an independent assessment of financial statements to ensure that they are free from material misstatement and are presented fairly in accordance with the relevant accounting framework.

Shareholders rely on external auditors to safeguard their interests by ensuring the integrity of financial reporting, which informs their investment decisions. Since shareholders bear the risk of loss and have a vested interest in the financial health and performance of the company, the auditor's accountability to them reinforces the trust and transparency necessary for effective corporate governance.

The directors of the company, while also having interactions with external auditors, are not the primary stakeholders in terms of accountability. They are responsible for managing the operations and reporting of the company. The company as a separate entity is a legal construct and does not possess interests in the way that natural persons like shareholders do. Employees may also interact with auditors and have an interest in the company's performance, but their relationship does not establish a direct accountability like that of the shareholders. Thus, the correct answer reflects who ultimately benefits from the auditor's work and who has the authority to take action based on the auditor's report.