You have just joined Docile and Co., an audit firm as Audit Manager. Docile and Co is in reality a three-person practice, The Audit Partner is a Mr. Donald Docile, who has been auditing businesses in the local town for 50 years. He is considered by locals to be a very nice man with a strong reputation for honesty. On your first day of work, you attend the office to find it in a state of turmoil. You ask what is wrong, and are told one of the previous audits overseen by the person you replaced as audit manager had resulted in the issue of an inappropriate opinion. The audit manager had made a mistake. It appears that while auditing Beta Tools, the previous audit manager, rather than visiting a warehouse located 600km away, had accepted a certification by one of the company directors that a material amount of stock as stated on the stock report was held at that warehouse. In fact the warehouse was empty. Beta Tools had gone into receivership a few weeks ago. The solicitors for the receivers had just sent a letter to Docile and Co. demanding that they reimburse the company the value of the missing stock. Mr Docile asks you to urgently draft a short report to him setting out the possible liability and reasons. Question 1 Required: Set out in a brief report to Mr Docile the legal liability situation for Docile and CO as you see it. Quote case law where applicable.