Song & Danse LLP is a city firm of Chartered Certified Accountants. The firm's accounts are produced by the administration partner but are subject to audit by Blanket, Mange LLP, another firm of Chartered Certified Accountants. In June 202X, a partner in Song & Danse who was suffering from overwork failed to realize that an enormous error had occurred in the preparation and audit of the financial statements of International Maize Ltd ('IM') for the year ended 31.5.202W.
Quantities of maize in transit had been inadvertently included in the company's inventories in both the producing country and the receiving country. The company had been acquired by Universal Porage Inc. ('UP'), which has now discovered the mistake. They have given notice that they intend to bring an action to recover damages from Song & Danse on the grounds that they relied on the audited accounts for the year ending 31.5.202W and that they would not have purchased IM had they known of the error. The stock of IM was overstated by £22.4m as a consequence of the error. The profit of IM was reported as £14.3m and UP paid £41m cash for IM.
Song & Danse carry professional indemnity insurance but only in the sum of £1m due to an administrative error. The partners of Song & Danse dislike each other and rely heavily on Blanket, Mange LLP. No one at Song & Danse has informed Blanket, Mange LLP of the pending legal action.

Discussion
– What auditing procedures might allow Blanket, Mange LLP to discover the existence of the action?
– How might the amount of the ultimate award and costs be determined by Blanket, Mange LLP?
– What other hidden liabilities might Song & Danse have at their year-end, 31.12.202X?