Question

The two cases that formed the basis for most subsequent decisions as to the determination of auditor negligence were:

		AWA and HIH.
		Caparo Industries and Esanda.
		Pacific Acceptance and London and General Bank.
		Kingston Cotton Mill and London and General Bank.

Match the case with the ruling, and choose the correct matching:

Cases:                                                                  Rulings:

Caparo Industries Pty Ltd v. Dickman	A. An auditor is a watchdog, but not a bloodhound
Kingston Cotton Mill Co.	B. Contributory negligence
AWA Ltd v. Daniels	C. An auditor’s duty of care is owed to shareholders as a group, not to individual shareholders

		A, B, C
		B, C, A
		C, A, B
		A, C, B

The principles established by Justice Moffitt in the Pacific Acceptance case do not include:

		auditors have a duty to use reasonable skills and care.
		auditors must properly document procedures used.
		auditors are watchdogs but not bloodhounds.
		auditors must audit the whole year.

Answer 1

1st Question : Kingston Cotton Mill case (year 1896) and London and General Bank (Year 1895).

2nd Question The correct choice is C, A, B as shown in the chart below

Caparo Industries Pty Ltd v. Dickman	C. An auditor’s duty of care is owed to shareholders as a group, not to individual shareholders
Kingston Cotton Mill Co.	A. An auditor is a watchdog, but not a bloodhound
AWA Ltd v. Daniels	B. Contributory negligence

3rd Question "auditors are watchdogs but not bloodhounds" The exact wording of Justice Moffitt in his ruling on the Pacific Acceptance case about this statement is quoted below:

"The “watchdog-bloodhound” analogy made in the Kingston Cotton Mill case may no longer represent the modern standard of care and skill expected of auditors"