Subject : Auditing

Topic : MIA BY LAWS /LEGAL LIABILITY/GOVERNANCE

open win QUESTION 2 A. PricewaterhouseCoopers (PwC), the global auditor was sued for USD$5.5 billion over its failure to spot massive fraud in the failed Colonial Bank, whose accounts it had audited. Legal proceedings against PwC were brought by trustee of Taylor, Bean & Whitaker Mortgage, a subsidiary for Colonial Bank. PwC claims that sophisticated frauds are difficult to detect and audits are no guarantee of exposure. (Forbes, August 2016) Required: a. In the context of auditors' liability, explain following terms: i. Privity of contract ii. Ordinary negligence iii. Duty of care (6 marks) b. Differentiate the auditors' liability under Common Law and Statutory Law. (6 marks)