Accountancy firm Fairhurst & Co. signed off the audit of the accounts of Happy Day Holiday Group Ltd, a group of travel agents, whose accounts showed sound financial health. Within months of this Happy Day Holiday Group Ltd had collapsed.

Legal proceedings have begun and Francos Bank have sued Fairhurst & Co. for negligence because they say that Fairhurst & Co should have identified the severity of Covid-19 on Happy Day Holiday Group Limited.

The claim of negligence was based on the fact that Fairhurst & Co had failed to discover fraudulent overstatements of the groups true financial position.

Fairhurst & Co had included a clear note within their audit report that it is managements responsibility to addresses the going concern of Happy Day Holiday Group, and they held no responsibility to anyone else for their audit work.

Required:

1. What is the current legal position regarding negligence by professionals in the UK and how has this developed over the years?

2. Are Francos Bank likely to be successful in their law suit, and why?

You need to refer to legislation and at least 6 relevant cases including 3 from the last 10 years.

(Approximately 500 words) [30 marks]