Which of the following cases deals with the negligence of auditor in due performance of his duties?
Which of the following cases deals with the negligence of auditor in due performance of his duties?
The correct option is D Leeds Estate Building & Investment company V. Shepherd(1887)
It was held in the case of Leeds Estate Building & Investment Society vs. Shepherd
(1887) that if an auditor is found negligent in the performance
of his duties as an auditor, he is liable for damages. In this case, the
auditor could not see that:
(i) The Articles of Association has not been fully complied with,
and
(ii) Dividends have been paid out of capital.
Decision – “It is the duty of the auditor not to confine him
merely to the task of ascertaining the arithmetical accuracy of the Balance
Sheet, but to see that it is a true and accurate representation of the company’s
affairs. It was no excuse that the auditor had not seen the articles when he
knew of their existence.
Therefore the auditor was held liable for negligence in due
performance of his duties.
It was held in the case of Leeds Estate Building & Investment Society vs. Shepherd (1887) that if an auditor is found negligent in the performance of his duties as an auditor, he is liable for damages. In this case, the auditor could not see that:
(i) The Articles of Association has not been fully complied with, and
(ii) Dividends have been paid out of capital.
Decision – “It is the duty of the auditor not to confine him merely to the task of ascertaining the arithmetical accuracy of the Balance Sheet, but to see that it is a true and accurate representation of the company’s affairs. It was no excuse that the auditor had not seen the articles when he knew of their existence.
Therefore the auditor was held liable for negligence in due performance of his duties.
