Accuracy of the managers certificate, Business Law and Ethics

Accuracy of the managers certificate:

Was it the duty of the auditors to test the accuracy of the manager's certificate by a comparison of the figures in the books, and were they liable for the dividends which had been paid in consequence of the erroneous balance sheets?

HELD:

It being not part of the duty of the auditors to obtain stock, that they were justified in relying on the certificates of the manager, and they were not warp to check his certificates in the nonattendance of anything to raise suspicion , a person of acknowledged competence and high reputation.  They were not liable for the dividends wrongfully paid.

NOTE:

i) An auditor is not bound to be suspicious where there are no status to arouse suspicion; he is merely warp to exercise a reasonable amount of care and skill.

ii) Where an officer of a company has committed a breach of his duty to the company, the direct consequence of which has been a misapplication of its assets, for which he could be made responsible in an action, such breach of duty is a "misfeasance' for which he may be summarily proceeded against under the Companies Act, and it is not necessary that an action should be brought.

The object of the section is to facilitate the recovery by the liquidator of assets of a company improperly dealt with by its promoters, directors and other officers.  The section applies to breaches of trust and to misfeasances by such persons, but is inapplicable to cases of breach of contract, trespass, negligence, etc.

Posted Date: 1/15/2013 2:29:50 AM | Location : United States







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