Auditors could be considered negligent

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Reference no: EM133209517

Shareholders in KGL are disappointed about its falling share price. A number of issues may have affected the price, including a fall in the price of gold and a damages claim against KGL. The damages claim began three years ago as a result of KGL undertaking mining operations without a mining lease on land that they did not own. As a result of this action KGL has had to cease mining on this section of their mine in the current financial year. Although the damages claim was made some time ago, a large contingent liability for the amount was only included in the notes of the previous year's accounts. It had not appeared in prior years notes. Considerable concern about the significant damages claim was raised by shareholders at the last annual general meeting. Many voiced the opinion that this contingent liability should have been included in the notes of previous annual accounts, claiming negligence by the auditors.

Use relevant case law to determine if the auditors could be considered negligent? What legal defenses, if any, are available to the audit firm?

Reference no: EM133209517

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