This report discusses the auditing and assurance practices in Australia, focusing on a specific case involving negligence and loss. It analyzes the duty of care, negligent conduct, loss suffered, casual relationship, and auditor defense. The report concludes that the auditors are not liable for the loss suffered by the company.
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Running Head: AUDITING AND ASSURANCE IN AUSTRALIA AUDITING AND ASSURANCE IN AUSTRALIA Name of the Student Name of the University Author Note
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1AUDITING AND ASSURANCE IN AUSTRALIA 1 July 2019 Samway Baker Fitzgerald Liability to Far Faraway Pastoral Limited & Shareholders Executive Summary This report is prepared for identifying if Far Faraway Pastoral Limited (FFA) is sued against Samway baker Fitzgerald (SBF) for negligence against the loss. These findings will indicate that FFL will unable to prove that loss was suffered due to the negligence of SBF. In addition, FFA was responsible for contributory negligence and lastly, it has been proved that SBF does not obligated for the duty of care to McCarran Pastoral.
2AUDITING AND ASSURANCE IN AUSTRALIA Table of Contents Introduction...................................................................................................................3 Duty of Care..................................................................................................................3 Negligent conduct.........................................................................................................3 Loss suffered................................................................................................................4 Casual relationship.......................................................................................................4 Auditor defense.............................................................................................................4 Conclusion....................................................................................................................5 References...................................................................................................................7
3AUDITING AND ASSURANCE IN AUSTRALIA Introduction The aim of this assignment is the analysis on the change in the accounting information system during the year 2018 has reported significant error in inventory at the store of TRC that is misstated by the amount of $16.6m and net assets at the same value. This has resulted in the withholding the payment by Mc Carran Pastoral to FFA and the planning of FIFA to sue against SBF for negligence. Therefore, under this report discussion will be based on the question whether SBF has failed in exercising ‘due care’ in the audit of TRC, question if the FFA is guilty for contributory negligence and whether duty of care to McCarran Pastoral is owed by SBF (Kaptein, 2015). Duty of Care In the APES 110 the section of 130.1 point out that the auditor’s duty is attaining and maintaining the professional competence level as well as they should undertake the work which they would have expectation for completing it with the professional competence and due care which has to be in accordance with the applicable professional as well as technical standards.SBF have the duty of care for its clients FFA. As per AWA Ltd V Daniels ta Deloitte Haskins & Sells (1995) 16 ACSR 614 SBF is liable to FFA if the case is filed against FFA. Moreover, Skye Martin who is senior auditor of FFA is not allowing Steve for reporting about the material errors in the financial statements, also she is making bad comments on the other auditors, hence, she comprises the integrity and due care. Therefore, in this case fault is from FFA auditor’s side not from SBF auditor’s side (Alleyne, Haniffa & Hudaib, 2016).
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4AUDITING AND ASSURANCE IN AUSTRALIA Negligent conduct “Hedley Byrne & Co. Ltd v Heller and Partners Ltd (1963) 2 ALL ER 575” and Scott Group Ltd v Mcfarlane (1978) 1 NZLR 553case, it has been decided that the audit Hence, FFA have to prove about the negligence of SBF in detecting the revenue recognition method for the year end 30 June 2019 on the sale of cattle because it was different from other years(Backof, Bowlin & Goodson,2014). Loss suffered Case of Hedley Byrne & Co. Ltd v Heller and Partners Ltd (1963) 2 ALL ER 575 have recognised that, liability which is for the pure economic loss does not arise from the contractual relationship, has presented the idea of “assumption of the responsibility”. FFA have to prove that they have suffered losses. Shareholders can suffer loss which results in dropping of share price. Hence, claim is to done by the shareholders not FFA (Peter, 2014). Casual relationship Case of Esanda Finance Corp Peat Marwick Hungerfords(1997) 15 ACLC 483 has confirmed that the liability of auditors to third parties as the auditors does not obliged for duty of care to the third parties. This appeal was dismissed with cost, as there was no cause of action in the negligence for breach of the duty available to the appellants. SBF due to have no office in the WA have organised expert who was independent have bring the conclusion that the new system’s changeover was carried out correctly and reliable. Hence, SBF was not liable for his duty.Neither FFA have the duty of care for the auditor’s part of negligencer who is third party (Augustine, 2014).
5AUDITING AND ASSURANCE IN AUSTRALIA Auditor defense According to “Kingston Cotton Mill (No 2) (1896) 2 Ch 279” which is the legal judgement in favour of auditor of the company, which describes that their role is of “watchdog” as compare to “bloodhounds” and hence, they are not liable for any wrongdoings which they have no any reason to where suspect were taking place. Hence, SBF is not liable for any misstatement done by FFA(Backof,2015). Conclusion Hence, duty of care is not owed by SBFto McCarran pastoral, it is because, why to pay for the wrong doings which they have not done. Here is the situation which, strongly convey that, FFA’s accounting treatment is in question and their auditor have done misstatement which is not ethical. They need to be asked about the treatment of the revenue recognition on the sale of cattle and wrong practices.
6AUDITING AND ASSURANCE IN AUSTRALIA References Alleyne, P., Haniffa, R., & Hudaib, M. (2016). The construction of a whistle‐blowing protocolforauditorganisations:afour‐stageparticipatory approach.International Journal of Auditing,20(1), 72-86. Augustine,O.E.,Chijioke,M.,Oba,E.,&Jonathan,E.(2014).AuditFirm Characteristics and Auditing Quality: The Nigerian Experience [J].Research Journal of Finance and Accounting,5(6), 23-34. Backof,A.G.(2015).Theimpactofauditevidencedocumentationonjurors' negligenceverdictsanddamageawards.TheAccountingReview,90(6), 2177-2204. Backof, A., Bowlin, K., & Goodson, B. (2014). The Impact of Proposed Changes to theContentoftheAuditReportonJurors'AssessmentsofAuditor Negligence.Available at SSRN,2446057. Kaptein,M.(2015).Theeffectivenessofethicsprograms:Theroleofscope, composition, and sequence.Journal of Business Ethics,132(2), 415-431. Peter, Z., Masoyi, A. D., Ernest, E. I., & Gabriel, A. O. (2014). Application of Forensic Auditing in Reduding Fraud Cases in Nigeria Money Deposit Banks.Global Journal of Management And Business Research.