Auditors´ Liability For Failure To Identify Fraud

In an important decision last week, the Court of Appeal considered whether or not a company which had committed fraud could nevertheless claim against its own auditors for failing to detect and report that fraud. The Court of Appeal held that it could not and struck out the alleged US$ 170 million claim against the auditors. This was because in bringing the claim, the company had to rely on its own fraud.

In reaching this decision, the Court of Appeal unanimously overturned the first instance decision of the court below. For our Law Now on that decision, please Click here.

The case concerned a company where an individual, Mr S, was the directing mind and will. It was essentially a "one man" company. The company practiced various frauds on a bank. The bank succeeded in its claim against the company. The company then went into liquidation, and the liquidators claimed against the auditors. So,