Cases Flipped

Question 1

Auditors = “watchdogs not bloodhounds”; reasonable care and skill required

Answer 1

Re Kingston Cotton Mill Co (1896)

Question 2

Highlighted the auditor’s duty to verify the physical existence of distant assets

Answer 2

McKesson & Robbins (1938)

Question 3

Auditors must supervise, report issues, and not over-rely on mgmt in cases of fraud

Answer 3

Pacific Acceptance Corp v Forsyth (1970)

Question 4

Highlighted auditor’s duty to communicate internal control issues.

Answer 4

AWA v Deliotte (1991)

Question 5

Forms the foundation for tort law, including negligence by auditors

Answer 5

Donoghue v Stevenson (1932)

Question 6

NZ case where duty can extend to forseeable third parties

Answer 6

Scott Group v McFarlane (1978)

Question 7

UK case, 3 part test: forseeability, proximity, fariness

Answer 7

Caparo Industries v Dickman (1990)

Question 8

Auditor failed on causation of loss (no causation)

Answer 8

Cambridge Credit (1985)

Question 9

No liability without proven reliance

Answer 9

Esanda v Peat Marwick (1997)

Question 10

Succeeded in 4 elements for negligence

Answer 10

Twomax v Dickson (1983)

Question 11

Auditor failed to act on red flags

Answer 11

R v McKinnon (1998)

Question 12

Responsibility can be shared among parties

Answer 12

Deliotte Haskins (1989)

Question 13

Greater liability for the party whose actions directly caused the loss

Answer 13

AIC v ITS Testing (1998)