- 7 Marks
AAA – L3 – Q19 – Professional Responsibility and Liability
Evaluate factors in deciding whether to contest or settle a negligence claim by Adom Bank against KT Ampofo & Co. for audit errors.
Question
Adom Bank Limited gave a loan to Kintampo Limited on 15 October 2015 and a review of the first six months of operation in May 2016 of the new shops revealed that the company was not doing well and could not pay the first instalment for the loan from Adom Bank Limited. Further investigation revealed that the audited financial statements signed by KT Ampofo & Co. which showed a profit of GH¢20.2M should have been of a loss of GH¢4.3M.
Adom Bank Limited has indicated its intention to sue your firm for negligence on the basis that it placed reliance on the financial statements audited by your firm.
Required:
Comment on the matters that you should consider in deciding whether your firm will contest the matter in court or seek an out of court settlement with the bank.
Adom Bank Limited has indicated its intention to sue your firm for negligence on the basis that it placed reliance on the financial statements audited by your firm.
Required:
Comment on the matters that you should consider in deciding whether your firm will contest the matter in court or seek an out of court settlement with the bank.
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