In the following scenarios you are required to discuss the possibility of the auditors being guilty of negligence: 1) Herman decided to take over B Limited because he wished to obtain the right to use the property owned by B Ltd. Herman's purchase price reflected his desire to take over the company but also included the consideration for the profitability of B Ltd as shown in its financial statements which were prepared and audited by the same accounting firm. It later became clear that the financial statements had a material misstatement and should have shown a smaller profit. Since there is no disclaimer of liability in the accounts, Herman sued the audit firm for negligence. 2) Mark was a shareholder in C Plc. When he read the C Plc's financial statements, he sold all his shares because the statements revealed a loss and the expected forecast of C Plc was not favourable. It later turned out that the statements had a material error and, in fact, the company was in an extremely healthy financial state. Mark sued the audit firm that prepared and audited the statements in the tort of negligence. Note that there was no disclaimer of liability in the statements. 3) The financial statements of A Ltd was audited by the audit firm. Unfortunately, the audit firm misrepresented A Ltd.'s financial position because of a major mistake made by the audit team manager. Before the release of the audit report, the audit firm was fully aware that Z Ltd had been promised a set of the audited accounts as soon as they were available in order to help it in preparing a takeover bid for the shares of A Ltd. There was no disclaimer of liability in the audit report. Z Ltd sued the audit firm in the tort of negligence. Required In each of the above situations, a. Is the audit firm liable to the client in negligence (Yes or No)? b. Give a brief explanation in support of your answer in (a) in each situation by discussing relevant case law