Tickitt & Run are the auditors to AHM Publishing Co. Ltd, publishers of textbooks. They carried out the audit for the year ended 31 December 2X09 and signed an unqualified audit report. Shortly after the AGM which was on 23 June 2X10 negotiations began for the sale of the company to Amalgamated Publishers PLC who acquired the company in November 2X10.

The audit of AHM's accounts for the year ended 31 December 2X10 accounts by Puce Watermelon in March 2X11 revealed that a printing bill for two of AHM’s bestselling titles dated 30.11.2X09 had been disputed and thus not entered in the books. The matter was resolved in August 2X10 when AHM paid the

£288 000 owing. The bill had not been accrued in the 2X09 accounts.

Amalgamated Publishers plc paid £1m for AHM whose reported profits net of management remuneration were: 2X07 £216 000, 2X08 £213 000, 2X09 £217 000.

Amalgamated sued Tickitt & Run for damages.

Questions:-

1. Discuss in detail all the issues raised by this case.
2. How might Tickitt & Run defend themselves against this action?