1.24 Negligence Essay

3.24 Negligence, liability to third parties theory: negligence- any conduct that is careless or unintentional in nature and entails a breach of any contractual duty or duty of care in tort (that is , those who the auditor could reasonable foresee would rely on the auditor’s report), owed to another person or persons. (a) What are the liabilities, if any, of the auditor? To whom is the auditor liable? The liabilities are that the auditor had failed to detect a significant embezzlement by a senior manager at Sonny, which led that Sonny failed to obtain loan from Bank of Australia due to some low ratios from the financial statements. The auditor is liable to Sonny because of Negligence.

(b)If the auditor did uncover the embezzlement, and noted it in the notes to the
1. What is the purpose of statements that may give rise to reliance reasonably being placed on them?
2. To what extent may responsibility for any loss be assigned on the one hand to the auditor1s negligence and, on the other, to other causes and other parties?
Proximity, reasonable foreseeability, reliance- duty of care
Loos due to reliance on negligently prepared report, loss quantifiable.

5.27 liability to third parties, Privity letters a, outline your defence against the action taken by LRB. Provide specific case references to support your answer. in the case LRB is not the third party who the auditor should be responsible for.
Auditor must take reasonable care to avoid acts of omissions which you can reasonable foresee would be likely to injure your neighbor who are so closely and directly affected by my act that I ought reasonable to have them in comtemplation as being so affected when I am diresting my mind to the acts or omissions.
Case support:
Caparo case, it is unreasonable to hold the auditors responsible for their use, by shareholders or others, for any other