A return to rational concepts

Article Abstract:

The House of Lords has issued rulings to eliminate the open-ended liability to third parties faced by auditors in the UK. The Lords has declared that auditors have a duty of care to a third party only if they have knowledge on the nature of the third party's transactions, know that their reports will be disclosed to the third party, and are aware that the decisions of the third party will be based on these reports. However, these rulings have also made UK auditors apprehensive that the less likelihood of being sued will render the generality of accounts useless, thus reducing their credibility. The changing trend of auditor's liability is also evident in case rulings in the US and Australia. The 1992 Security Pacific Business Credit v Peat Marwick Main & Co and the AWA v Deloitte cases in the US and Australia, respectively, are described.

United States, Australia, United Kingdom. Parliament. House of Lords, Malpractice, Auditors

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The mixed benefits of Latent Damage Act

Article Abstract:

The Latent Damage Act of 1986 attempts to establish time limitations and apportionment of blame for product liability cases. The statute requires that actions for negligent acts must be brought within six years of the original mistake, but allows a three year extension period to allow a reasonable amount of time for the discovery of mistakes. The Act also establishes liability rules for plaintiffs in the event of retirement, mergers, or cessation of business. The Act is helpful in that it provides a consistent guideline for time limitations on actions, but it also increases accountants' liability.

Accounting and auditing, Product liability, Products liability

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Whose fault is it anyway?

Article Abstract:

A recent court case may have a major effect on accountants' liability. The judge in Caparo Industries plc v Dickman & Others (QB Division December 1987) ruled that the auditors did not have a case to answer. Caparo purchased Fidelity on the basis of audits of Fidelity made by the third party defendant Touche, Ross and Co. Caparo claimed suit against Fidelity for misrepresentations and against the auditor Touche Ross for failing to detect and report the misrepresentations. The judge in the case concluded that no duty was owed to the plaintiff by Touche Ross.

Auditing, Accountants, Touche Ross and Co., Caparo Industries PLC

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