Read the following extract from the ACCA (the Association of Chartered Certified Accountants) website, which is the global body for professional accountants, as stated: “Over the past two decades the bill for litigation settlements of Big Four audit firms alone has run into billions of dollars. Examples include Deloitte’s 2005 settlement of $250m regarding its audit of insurance company Fortress Re and PwC’s $229m settlement in the lawsuit brought by the shareholders of audit client Tyco in 2007.” “Auditor liability is increasingly concerning, both in terms of audit quality and the reputation of the profession but also in terms of the cost to the industry and the barriers this creates to competition within the audit market.” (Source: www.accaglobal.com) Required Given the importance of professional liability to auditors and the negative publicity this creates for the profession as a whole, research a recent case (Post 2000) where an auditor/audit firm was sued for professional negligence. Students may research cases from the UK, USA, NZ or Canada in addition to Australian cases. With reference to the facts of the selected case, the significant Auditing and Accounting issues and the final judgement handed down in your selected case: • Provide a brief description of the key events and the factual issues behind thecase • Explain the culpability or which parties were deemed responsible and why.
Outline the damages imposed or the penalties and consider whether they were appropriate.
• investigate and explain the relevant issues in Auditing and Accounting raised by the case,
• The root-cause of the issues such as; market pressure, organisational culture, fraud etc.
• any problems, mistakes or misrepresentations made by the defendants, which contributed to the adverse judgement and the awarding of damages,
• Finally, provide recommendations and possible improvements to: o the Audit Strategy, o the Audit Program, o Other effective measures; which would prevent the recurrence of the same litigation in the future and maintain the professional reputation of auditors. Resources and Reference Links: 1. https://asic.gov.au 2. https://www.accaglobal.com/gb/en.html 3. “Are Auditors fit for purpose?”- https://www.bbc.co.uk/programmes/m0002mg6 4. Textbook: Gay & Simnett, Auditing & Assurance Services in Australia, 6th Edn, McGraw Hill Education, 2017 5. Students may explore the following high-profile cases (Students are not allowed to select the following cases): o Deloitte’s 2005 settlement of $250m regarding its audit of insurance company Fortress Re. o PwC’s $229m settlement in the lawsuit brought by the shareholders of audit client Tyco in 2007 o Royal Bank of Scotland (RBS) vs Bannerman Johnstone MacLay (Bannerman) (2002)