Watts and Ampere audited the accounts of Fly by Nite Ltd. After completion of the audit, the directors approached a number of lenders with the unqualified auditors report for the purpose of obtaining additional finance. The auditors were not only aware of this but assisted the company with suggestions. Subsequently the accounts were found to be materially overstated by management at year end so as to remain solvent. One bank lent Fly by Nite the required amount and the company is now in liquidation.

Required:

Discuss the liability of Watts and Ampere to each of the following parties;

a)One Bank

b)The shareholders of Fly by Nite

c)Fly By Nite