THE LIABILITY OF ACCOUNTANTS AND AUDITORS FOR NEGLIGENT STATEMENTS IN COMPANY ACCOUNTS
| Date | 01 January 1973 |
| Published date | 01 January 1973 |
| DOI | http://doi.org/10.1111/j.1468-2230.1973.tb01353.x |
| Author | R. Baxt. |
THE
LIABILITY
OF
ACCOUNTANTS AND
IN COMPANY ACCOUNTS
A'UDITORS
FOlt
NEGLIGENT STATEMENTS
IT
is
not surprising that the decision of the House of Lords in
ZZedley Byrne
an.d
Co.
Ltd.
v.
Heller and Partners
Ltd.l
should
have caused concern amongst the accounting profession and those
connected with
i,t.
It
seems that the decision has thrown the
profession into a kind of turmoil.* In this article we will explore
some of the reasons why such
a
turmoil should have arisen and
w,hether
or
not such turmoil can be allayed.
PUBLICITY
OF
COMPANY
Accou~~s
The development, of the modern corporation has seen with
it
a
growth,
inter
alia,
in sophistication in the methods of (a) fund-
raising from the public (either by way of share capital
or
loan
capital), and (b) evolving techniques and stratagems
in
the use of
the take-over
offer
as a method of acquiring control
or
ownership
of other
corporation^.^
Side by side with the grow,th of this
sophistication and the development
of
accompanying
skills,
has
been the evolvement of one
of
the features of
"
the basic philosophy
)'
underlying company legislation. This philosophy was that (at first)
shareholders and (later) the public alike should be given as much
useful financial information about companies, in which they are
investors
or
in which they have an interest as members of the
public, as
it
is
feasible
to
su~ply.~
It
was only at the turn of this century that the presentation of
accounts became neces~ary.~ This, strangely, had been preceded
by the requirement of the appointment of auditors.e The necessity
for filing and distributing accounts was provided for by the Act of
1920
in the United Kingd~m.~ The Act required that accounts of
1
19641
A.C.
465.
2
see
e.g.
Dickerson,
Accountants and the
Law
of
Negligence
(Canadian
Institute
of
Chartered Accountants,
1966),
pp.
91-95
;
and Dickerson,
Aspects
of
Accounting and Auditing
(Langhour,
1965),
pp.
87
et seq.
3
AR
to
(a)
see Qower,
Modern Company
Law
(3rd ed.), pp.
57
et seq.
and pp.
283
et seq.;
as
to
(b)
see Gower,
op.
cit.,
pp.
67
et seq.
and Weinberg,
Takeovers and Amalgamations
(3rd ed.)
passim.
4
Committee on Company Law Amendment (Cohen Committee)
1945
Cmd.
6659,
para.
5;
Gower,
op. cit.,
p.
55.
5
By
the Act
of
1900 (7
Edw.
7,
c.
24),
8.
21.
The earliest
I'
modern
"
Act (Act
of
1844)
required accounts but this provision was repealed in
1856.
6
By the Act
of
1900 (63
&
64
Vict. c.
48).
In
Victoria the requirement
for
accounts to be prepared and audited was introduced in
1896
as
a
result
of
the
sdoption
of
the report
of
the Dsvey Committee on Company Law.
7
This legislation was to a large extent based on the report
of
the Greene
Committee on Company Law Reform
(1926
Cmd.
2657).
42
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