Module 10

Question 1

What is common law?

Answer 1

system of laws based on decisions made by judges in court. based on the concept of judicial precedent

Question 2

What is negligence?

Answer 2

breach of legal duty of care which results in loss or damage being suffered by another party

Question 3

How do you establish negligence?

Answer 3

• did the accountant have a duty of care?
• was work negligently performed
• claimant suffering quantifiable, reasonably foreseeable loss

Question 4

What is the tripartite test of duty of care?

Answer 4

• economic loss foreseeable?
• close and direct relationship
• imposition of duty of care is fair, reasonable and just

Question 5

What is a special relationship?

Answer 5

one person must be acting in a professional capacity
other person relies on the advice
the advice giver knows the advice will be relied upon

Question 6

Does the auditor owe a duty of care to shareholders?

Answer 6

can only be sued for negligence by the body of shareholders as a whole

Question 7

How can auditors avoid litigation?

Answer 7

• engagement letter
• identifying the risk profile of potential clients
• ensuring a sound audit approach is followed

Question 8

what is a liability limitation agreement?

Answer 8

limits the amount of liability owed to the company by the auditor

Question 9

What are the commonly relied upon defences in a negligence case?

Answer 9

-contributory negligence (partial defence)
-volenti non ift injuria- claimant consented to risk - complete defence
ex turpi causa- due to their own illegal act

Question 10

What cases relate to special relationship?

Answer 10

Hedley Byrne Ltd v Heller
RBS v Bannerman
Barclays v Grant Thornton

Question 11

What cases relate to duty of care?

Answer 11

Caparo v Dickman

AWA Limited v Daniels

Question 12

What cases relate to reasonable person test?

Answer 12

Re Kingston Cotton Mill

Question 13

What cases relate to ex turnip causa?

Answer 13

Moore Stephens v Stone and Rolls