Law cases

Essay by 11838adamUniversity, Bachelor's November 2014

download word file, 7 pages 0.0

Business Law MLC 101

By Adam Mather

Student ID: 213356827

1. Policy

From the topic of this essay we consider to whether auditors owe a duty to take reasonable care when auditing a company. Firstly an auditor's job is to study, expect and analyse the accounts of the company and draw conclusions or make a decision whether the financial position of the company in itself is factual or accurate in terms of where they actually stand it that point of time.

So from this we question whether the law of misrepresentation should apply fully to auditors. This has proved problematic for the courts as it has serious occupational or business repercussions in which the clarification or result of the decision made depends on policy considerations rather than purely legal ones. It has to be then considered who auditors owe a duty of reasonable care when auditing the company. The parties involved that they might owe reasonable care when auditing a company can include shareholders, potential investors, bankers and creditors.

When taking in consideration whether auditors owe a duty of care to a company we can say that if a auditor has a contract with the company itself the auditor has to fulfil the contractual obligations of taking reasonable care in preparing the audit, they also owe a duty of care in tort to the company.

However in the case of shareholders, investors and lenders this is different because they do not have a contract with the auditor. So in this case there is no duty owed to these groups in contract law so the only way they can successfully sue in the court of law is through tort. To successfully sue they will have to prove the auditor owed them a duty of care.

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