The accountant of Hilltop Limited has incorrectly classified a bank loan that was due in the next financial year as a non-current liability and failed to include a pending lawsuit against the company as a contingent liability. Both amounts are material and have not been detected by either the directors or the auditors. Following the discovery of these mistakes, the shares in Hilltop Limited lost value rapidly and the company was placed into liquidation.

Required

Discuss the auditor's liability for losses suffered by the bank.