Caparo Industries Plc v Dickman and Others
ROLL NO 53
LL.M 1ST YEAR
The collapse of the energy monolith, Enron, and the failure of Arthur Anderson, the firm that audited Enron’s accounts, to identify the rot in the company have been one of the biggest stories to hit the market in the last one year. As a result, the law relating to the auditor’s liability has once again come into focus.
In the present day setup, the sweeping changes that liberalization has brought in, along with recent instances of embezzlement, have shaken investor confidence. As a result, the role of regulators and inspectors such as auditors has been brought into prominence. Auditors are now increasingly being seen as the authorities, who can check the abuses and irregularities in the financial aspects of the companies, thus safeguarding the interests of the shareholders and investors. In view of such high expectations, “highest standard of care in accounting” has come to be expected out of the auditors and liability is sought to be imposed upon them for any deviation from the expected “high standards”.
In consonance with this throughout the decades of the 1960s, 1970s, and 1980s there had been an increasing trend of the judicial expansion of the number of third parties to whom an accountant can be held liable. In fact, this period has been described as the “dark ages” of liability for auditors. However, since the 1990s an international trend has emerged toward a narrower scope of accountant liability to non-clients for negligence.
This significant reversal in judicial trend has been brought about by landmark decisions such as Caparo Industries plc v. Dickman, which is the subject matter of review in the present report.
Aims and Objectives... [continues]
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