Appeals Court raps Accounting profession

The Courts of Appeal ruled recently on 2 fraud cases where the auditors took some blame for losses experienced by their respective clients.
What are the 2 cases?
  • Case 1 – Gaelic Inns vs PlanAssure Public Accounting – I discussed it back in Feb 2007. Take a look. http://accountingwithedgar.blogspot.com/2007/02/denise-ang-and-her-gaelic-victim.html
  • Case 2 – JSI Shipping vs TeoFoongWongLCLoong (Tfwl) – Mr John Riggs, the MD of JSI Shipping, made $1.8 million disappeared via its monthly salary! FYI – his salary represented 25% of total staff costs. The Court said “Tfwl should have shown more professional scepticism.” (In another word, the errors are so BIGG that normal human eyes should be able to see and check on them.)

So what is the penalty for not doing your job?

In Case 1, PlanAssure is to pay Gaelic Inn $317,108 (half of earlier ruling of $775,266) for contributing to the negligence.

In Case 2, Tfwl is to pay JSI $273,386 for being bo-chap to Mr Riggs’ activities.
As in any profession, auditors too have their fair share of problems and risks.
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One Comment

  1. Hi Edgar,It is very exciting to read your articles on auditing issues.An auditor who has negligently audited the accounts has liability under tort of Negligence.What is an auditor’s liability?In order to establish liability, the following factors must be satisfied.1. There is a duty of care2. There is a breach of duty of care.3. The breach must have cause damage suffered.

    Reply

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