Who sue who and for what?
Gaelic Inns (of Muddy Murphy’s Irish Pub and Penny Black of Boat Quay) sued Patrick Lee Public Accounting Corporation for $1 million losses suffered by Gaelic Inns.
How was the monies stolen?
The then Group Finance Manager, Ms Denise Ang did not banked in the daily bar takings between March 2003 and May 2004.
What is the Hon Judge Belinda Ang’s decision and basis?
The Judge ruled in favour of Gaelic Inns and awarded $775,000 plus interest.
Judge said “while an auditor is not expected to be a detective, the duty to audit carries with it an incidental duty to warn… managementt or the directors of fraud or irregularities uncovered”.
Was it uncovered by the auditor?
The audit was in progress in March 2004 while the crime was still in progress.
Mr Lawrence Phong, the audit manager in charge then, was reviewing the bank reconciliation statements. There was a discrepancy of about $680,000 noted between cash balance as per accounts and actual cash in bank!
Mr Phong was faulted for not doing an indepth investigation immediately upon its discovery, tardy in follow-ups and lastly for not highlighting the matter to the management.
Does this decision further increase audit risk to the auditors? Lawyer Philip Fong, representing Gaelic Inns, seems to think so. The decision highlighted the need to review process and audit procedures of cash, particularly in F&B or retail businesses.
However, such annual audits are still not expected to discover frauds unless specially commissioned to do so. In this case, the auditor had laid his hands on the most glaring documents highlighting the crime ie. bank recon statements. And thus the decision.
P/S – Pic of December’s rain clouds