Simean & Co, a firm of CPAs, issued an unqualified audit report for its client, Xing Manufacturing Corporation, a footwear manufacturer in Asia. Xing Manufacturing, listed its head office in Toronto, Ontario, and its shares were traded on a Canadian Stock Exchange. Simean & Co. knew the company was in the process of refinancing a significant bank loan coming due, and the bank was anxious to see the year end results. After an unqualified audit report was issued, the regulator of the stock exchange halted the trading of the shares after allegations of management fraud came to light. As a result, the share price plummeted and the company went out of business.

Required:

(a) List two (2) parties/groups that Simean & Co. owe a duty of care. (4 marks)

(b) Document four (4) criteria the bank must demonstrate to establish negligence? (4 marks)

(c) What two (2) legal defences are available to Simean & Co? (4 marks)