Content

The Pursuers' Pleading The Defenders Submissions Court Decision Subsequent Event

The Third Party Royal Bank of Scotland The Defender The Auditor of APC company
The First Party APC & APC Civil

Briefing Case
The Bank provided working capital to two companies (APC & Civil) in term of : 1 ) Lending Money to the companies through overdraft facilities and term loans 2 ) purchase shares in the APC
Referring The Audit Report prepared by the Auditor

 The Auditor prepare a negligence Audit Report which expenses of the company had been capitalised. Subsequently, APC goes to receivership and the bank suffered the losses : the shares bought by the auditor have no value and the bank suffer cash losses up to 19,629,000 The Bank intend to sue the auditor regarding their losses

The Pursuers' Pleadings

THE STANDARD OF CARE

BREACH OF DUTY OF CARE

CASUAL RELATIONSHIP

DAMAGES

The Pursuers' Pleadings The auditor have a duty of care to prepare audit report to the plaintiff since they know that the company heavily reliant on its bank overdrafts with the plaintiff. The plaintiff require audit report before grant any bank overdrafts. The defenders staff, Mr Mc Mahon transferred some of the purchases and expenses of the company to the balance sheet item and the defender finalized their audit report after that.

THE STANDARD OF CARE

BREACH OF DUTY OF CARE

The Pursuers' Pleadings

CASUAL RELATIONSHIP

The auditor report that prepared by auditor is using by the plaintiff as references for the loan facilities.

DAMAGES

The plaintiff incurred loss. The plaintiff share in APC have no value and the plaintiff suffer cash losses up to 19,629,000

The Defenders' Submissions

The Defenders stated that they do not have any duty of care towards the plaintiff since they owe duty to their employer No claim of damage to them

The Court Held :

In reference to the Caparo case, the court held that when the auditors did not disclaim their responsibility relating to the audited accounts, they could be held owing a duty of care to a third party if they knew ( or ought to have know ) that the third party would rely on the audited accounts for lending decision

Subsequent Events :
Disclaimer Pharagraph should be add in the auditor s report The International Audit Standard subsequently changed too.

Example of Disclaimer Sentences

it is our responsible to form an independent opinion, based on our audit, on the financial statements and to report to you as a body in accordance with Section 174 of the companies Act 1965 and for no other purposes. We do not assume responsibility to any other person for the content of this report

THANK YOU