AF304 - Revision LectureChapters 1 - 6 & 8,9Week 9: Lecture # 1

Special AnnouncementsExam Wednesday 5-7mAttend tutorials this weekNo tutorials on Wednesday afternoon afternoon after 2pm for this week only. Attend any other session.All lecture notes on moodle+discussion forum

Mid-semester examDate & Time16th SeptemberExam time 5-7pm

VenuesLecture theatres 092-001 & U8

Coverage Chapters 1 6, 8 & 9 including lecture notes + tutorials

Format

Chapter 5Liability to shareholders/clients & 3rd parties.Auditor liability Cases-name, year, facts, judgment, principle/concept applied, relevant quotations.Legal terms tort, plaintiff, defendant, litigationProfessional indemnity/deep-pockets theoryNegligence 4 conditionsDue care to clients & 3rd partiesReasonable care & skill.Contractual/Special/causal relationship.Privity of contractContributory negligence/proportionate liabilityReasonable foreseeability, proximity, reliance.Comfort/Privity lettersLimiting auditors liability.Cases where damages were awarded.

Chapter 3

Principle Cases LaibilityConditions/PrinciplesDue careLondon & General Bank(1895)

Kingston Cotton Mill (1896)No

Due care but no negligenceAuditor is not bound to exercise more than reasonable care & skill.Auditor not an insurer

Watch-dog roleAuditor not bound to be detectiveReasonable care & skillPacific Acceptance (1970)

Caparo (1990)Damages of $1.5m

NoPersuasive vs conclusiveChanged standards to meet changed conditions.10 duties/responsibilitiesProfessional man owes dutyNegligenceAWA case (1995)JEB Fasteners (1981)Yes Negligent but no liability Contributory negligenceDue care, negligent but no causal connection.Privity of contractWA Chip (1987)Negligent Contractual relationshipContributory negligenceAWA (1995)YesProportionate liability 1/3 & 2/3Causal relationship

Caparo (1990)Segenhoe (1990)Galoo (1994)NoYes$55m/NoComfort lettersRelianceNo causal connection

Principle Cases JudgmentConditionsDamages awardedCambridge Credit (1985)Twomax (1982) (3rd party) Yes/$145mYes Negligencedamage $20mReliance & reasonable foreseeabilityComfort lettersCaparo (1990)NoProximity relationship3 conditionsDuty owed to shareholders no individual.Liability to 3rd partiesContractual relationship

Foreseeability & Proximity

RelianceDonoghue Partners(1932)

Candler (1951)Ultramares Corp.(1931)

Hedley Byrne (1963)

Evatt (1968)Shaddock & Asso (1981)

JEB Fasteners (1981)Esanda Finance (1994)No

NoNo

No

NoNo

NoNoPhysical injury. Negligence is redressable.No contractual relationship.Indeterminate classNo contractual relationshipDisclaimer Business of giving advise.Determinative role of RelianceLack of causal relationship

3 conditions for reliance on report (basis, purpose & reliance)

Exam tips!Write simple, direct to the point answers.You may use bullets or numbers where appropriate (for e.g. if it says give 3 examples or state 2 reasons or outline the number of .- then actually you should use numbering system to answer the questions).Avoid use of paragraphs.Avoid lengthy answers check for the marks awarded for that question and then write answers accordingly.Hand-writing should be neat, clear and easy to understand.Do not use coloured pens or pencils (you may use either black or blue pens).

Exam tips!Use a fresh page for each case study.Do not forget to write the question number on the top of the answer booklet.Label your answers accordingly.Do not jumble up your questions within each case answers (i.e. start from the first question in that case and then follow suite).Do not just write yes or no or agree, disagree. You need to give reasons to support your answer (justify).Be careful of the choice of words such as explain, discuss, list, identify, what, justify etcUse simple quotations from the case where appropriate (avoid using lengthy quotations).Answer all the required questions fully.

End of Lecture GOOD LUCK FOR YOUR EXAM