Teemu is an equity partner of Hanley Aarons & Co., a firm of accountants. Tettey Ltd, who were planning to mount a takeover of Bali Ltd, consulted Teemu, who regularly gives advice on corporate takeovers. Hanley Aarons & Co. are the auditors of both companies and Teemu is the partner in charge of each audit. The latest audited accounts for Bali Ltd showed healthy profits and Teemu was invited to attend the next board meeting of Tettey Ltd to discuss matters. During the meeting, Teemu stated that he had signed off the accounts of Bali Ltd and, having found nothing untoward, he would fully stand by the results.

Tettey Ltd subsequently went ahead with the takeover but soon after discovered that Bali Ltd was not profitable at all and was in fact close to insolvency. The Directors of Tettey Ltd have consulted solicitors and are now looking to bring an action in negligence against Hanley Aarons & Co for the losses sustained.

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Consider the potential liabilities here.