Case: Allen Craig & Co. (London) Ltd. (1934)

Fact of the Case: The company made loss in each year of its existence, and there was a deficiency of assets to meet liabilities of over 40,000. In submitting the accounts for the year to 30th June, 1924 the auditor sent a letter to the company drawing attention to the serious position of the company, this being quite apart from the normal audit report. In 1927, in submitting the accounts for the years to 30th June, 1925 and 1926 respectively, the auditor sent further letters, showing that there was a deficiency as regards creditors of nearly 11,000.

The liquidator of the company took out a summon for misfeasance against the former managing director and the auditors asking for a declaration that such parties were liable for the debts of the company incurred after 30th June, 1925.

Legal View: It was held that the duty of the auditors, after having signed the report to be annexed to a balance sheet, is confined only to forwarding that report to the secretary of the company. It will be for the secretary or the directors of the company to convene a general meeting and send the balance sheet and report to members entitled to receive it. The auditor, in no way, will be held liable in this situation.