The American Accounting Company: Great Gold Limited (GGL)

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CHARLES STURT UNIVERSITY ACC568: AUDITING ASSIGNMENT ITEM 2 LECTURER NAME: MICHAEL MATTHEW CLASS TIME: MONDAY 4.00 p.m. -7.00 p.m. SUBMITTED BY: STUDENT NAME: SANDESH SHRESTHA STUDENT ID: 11612653 “The work done in this assignment is entirely mine and there is no plagiarism and all the sources that have been referred are acknowledged in references.” Question 1. Ethical Issue The American Accounting Association (AAA) ethical decision model with appropriate ethics standards was used for recommending the course of action for Janelle which is presented below: Headings Description 1. Determining the facts 1. Great Gold Limited (GGL) is a local mining company and Big Machine Limited (BML) is a company which provides…show more content…
The auditor is held liable if there is breach of duty of care and has conducted negligence in the audit work or by committing fraud which may lead to loss or damage suffered by the client. Negligence is defined as a unintentional or careless action undertaken which involves any breach in duty of care or contractual duty in tort owing a person or several persons. The client can successfully claim for negligence if duty or duty of care was owed to the plaintiff, duty of care was breached, the plaintiff suffered a loss or damage and there must be a relationship of casual nature between the defendant’s breach in duty of care and the plaintiff’s suffering of loss or damage. The auditor was held legally liable by the court due to negligence with reference to the case as in Pacific Acceptance (1970) 90 v WN (NSW) 29, auditors must take obligation and due care to protect the interest of their clients, communicate with the managements during the auditing period and prepare a correct and rational report for the clients. In this case, the auditors from Miller Yates Howarth owed duty of care to the clients who are Great Gold Limited under both the tort of negligence and law of contract. So, the auditors from MYH will be held liable to GGL due to negligence act carried out by the audit…show more content…
Contributory negligence refers to the failure in meeting the required standard by the plaintiff in protecting themselves where it is a contributing factor along the defendant’s liability in occurrence of the loss or damage. The reference to contributory negligence can be found in the case of Pacific Acceptance (1970) 90 v WN (NSW) 29 where the court ruled that the liability of the auditor could not be reduced based on contributory negligence even though the directors were also at fault. Also, in the case of AWA Ltd v Daniels t/a Deloitte Haskins & sells (1995) 16 ACSR 644 the court ruled that there was contributory negligence in the part of the company as their own negligence was the main reason for loss along with Deloitte’s negligence in not advising the board. Contributory negligence was upheld, and both the plaintiff and defendant were held liable for their part in the loss. Similarly, in this case, the company knew about the contingent liability claim being made for a long time but ignored it and did not include in the company’s account until recently whereby they failed to meet the required standard for protecting themselves from possible loss and damages. So, the management of the company Great Gold Limited also share the contributory negligence and will be held liable for the loss as they failed to include the large contingent liability claim in the company’s account as they operated mining

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