$($a$)$ You are a manager in Groom & Co$,$ a firm of Chartered Certified Accountants. You have just attended a monthly meeting of audit partners and managers at which client related matters were discussed. Information in relation to two clients, which were discussed at the meeting, is given below:

The auditor$$s report on the financial statements of Spaniel Co$,$ a long$-$standing audit client, for the year ended $31$ December $20$X$2$ was issued in April $20$X$3,$ and was unmodified. In May $20$X$3,$ Spaniel Co$$s audit committee contacted the audit engagement partner to discuss a fraud that had been discovered. The company$$s internal auditors estimate that $$4\mathrm{.}5$ million has been stolen in a payroll fraud, which has been operating since May $20$X$2.$ The audit engagement partner commented that neither tests of controls nor substantive audit procedures were conducted on payroll in the audit of the latest financial statements as in previous years$$ audits there were no deficiencies found in controls over payroll. The total assets recognised in Spaniel Co$$s financial statements at $31$ December $20$X$2$ were $$80$ million. Spaniel Co is considering suing Groom & Co for the total amount of cash stolen from the company, claiming that the audit firm was negligent in conducting the audit.

Required;

Explain the matters that should be considered in determining whether Groom & Co is liable to Spaniel Co in respect of the fraud.