Auditors and Legal Liability

Running head: AUDITORS AND LEGAL LIABILITY
Auditors and Legal Liability
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1AUDITORS AND LEGAL LIABILITY
Executive Summary:
The current report would evaluate the instance of “Royal Bank of Scotland (RBS) v Bannerman
Johnstone MacLay (Bannerman) (2002)”, in which the actuary was believed to be responsible
for professional carelessness and as a result, the firm has been sued for conducting such act. It
has been found that according to the defenders of the auditors of RBS, there was absence of
relevant statement of the prevalence of "duty to protect" that the "protectors" were accountable to
the pursuers for auditing the accounts of APC. However, these claims do not hold true because
like organisations or individuals, the actuaries are obligated by rules in the nations where these
people practice. Therefore, in accordance with the existing criminal law, there could be
prosecution for the auditors like insider trading and fraud. Therefore, the auditors have to
improve their skills as well as potential liabilities so that the clients could rely more on their
reports as well as examined "account statements", that are proper, unbiased and pertinent to the
decision-makers.

2AUDITORS AND LEGAL LIABILITY
Table of Contents
1. Introduction:................................................................................................................................3
2. Brief description of key events and factual issues behind the case:............................................3
3. Responsible parties of the case and evaluation of the appropriateness of damages or penalties
imposed:...........................................................................................................................................4
4. Investigation and explanation of the relevant issues in accounting and auditing highlighted in
the case:...........................................................................................................................................6
5. Root-cause of the identified issues:.............................................................................................6
6. Problems, mistakes or misrepresentations made by the defendants:...........................................8
7. Recommendations:....................................................................................................................10
7.1 Audit strategy:.....................................................................................................................10
7.2 Audit program:.....................................................................................................................11
7.3 Other effective measures:....................................................................................................12
8. Conclusion:................................................................................................................................13
References:....................................................................................................................................15

3AUDITORS AND LEGAL LIABILITY
1. Introduction:
In the current era, concerns regarding the legal liability of auditors are on the increasing
scale. The auditors are deemed to be highly significant individuals, since they bear the
responsibility to improve the reliability of the financial statements for all types of external users
(Anantharaman, Pittman and Wans 2016). The auditors are responsible civilly as well as
criminally, as in the case of other professionals like architects and physicians. In the absence of
independent and competent auditors, many global fraud cases would not have been identified.
Thus, it is necessary for the auditors to have the required skills and integrity at the time of
auditing the financial statements of the business organisations. The current report would evaluate
the study of “Royal Bank of Scotland (RBS) v Bannerman Johnstone MacLay (Bannerman)
(2002)”, here the accountant was suspected to be answerable for professional oversight and as a
result, the firm has been sued for conducting such act.
2. Brief description of key events and factual issues behind the case:
In this paper “Royal Bank of Scotland (RBS) v Bannerman Johnstone MacLay
(Bannerman) (2002)”, "RBS" is purported that they have forfeited over "£ thirteen million" in
unsettled draft provisions to the bankrupt customer, which is "APC Limited". According to RBS,
owing to fraud, the accounts of the past years had resulted in misstatement of the actual financial
position of the organisation and negligence was identified from the end of the defendants in not
identifying the same (Bailii.org 2019). The main lender or banker of the organisation was RBS
and with the passage of time, it had exercised options in order to subscribe for maximum shares
of the organisation. One of the needs of the lending agreement was to send the audited accounts
and monthly management accounts to the bank at the time the same was practicable. APC