Explain the impact that the pacific acceptance case

Explain the impact that the pacific acceptance case

Question 1.

Why would the courts want to limit the ability of third parties to sue auditors who have been negligent? Are there any arguments that this liability should not be limited?

Question 2.

A. Explain the impact that the Pacific Acceptance case had on existing auditing practice.

B. List four of the procedures or practices that were identified in the ruling as being part of a competent audit.

Question 3.

Match the case with the ruling:

Cases:                                                                          Rulings:

Caparo Industries Pty Ltd v. Dickman Duty of Care owed to third parties in the absence of a contract where the plaintiff has suffered physical injury
Kingston Cotton Mill Co. The standards for an auditor’s level of skill and care are more exacting today than in 1896
Segenhoe Ltd v. Akins & Ors Third party liability for auditors under the tort of negligence
AWA Ltd v. Daniels An auditor’s duty of care is owed to shareholders as a group, not to individual shareholders
Donoghue v. Stevenson An auditor is a watchdog, but not a bloodhound
Twomax Ltd v. Dickson, McFarlane & Robinson Contributory negligence
Pacific Acceptance Corporation Ltd v. Forsyth Auditors are liable for any dividends paid out of capital due to auditor negligence

 

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