Quality control chapter

It’s more likely a claim by an acquiring company discovering that auditors had negligently issued an unmodified, unqualified opinion on a set of financial statements of their client company that has now been taken over by the acquiring company

It’s most improbable (I cannot ever imagine it happening) to be “the public”

Maybe it could be, for example, the client’s bank relying upon work by the reporting accountant where the accountant KNEW that the bank was going to rely on the accountants’ report

No, I cannot remember a case and, in fact, I can’t even imagine a case, where the current auditors are taking action alleging negligence against the previous auditors. In order for a tort case to succeed it has to be shown that there exists a relationship (the neighborhood test) between the alleged negligent auditors and the person alleging that negligence.

In addition it must be shown that financial loss has been suffered ….

…..and that financial loss has been suffered as a consequence of reliance on the negligent auditors’ statement

I can’t fit these into a situation where a current auditor is likely going to sue the previous auditor! Can you?

No, not really. Look up the case Caparo v Dickman on the Internet and that gives you a good example of company A claiming that company A’s auditors had been negligent

Then look up the case ADT v BDO and see of you can spot the reason why BDO were found guilty of negligence whereas Touche Ross (Dickman) “escaped”

Then come back to me if you still have a problem

🙂