In June 2004, Feltex Carpets Limited raised NZ $254 million in an initial public offering. Twenty seven months later the company was in receivership, its share price having collapsed from $1.70 per share to 3 cents per share.

a) Summarise the history of the FeltexCarpets Limited case.

b) Critically discuss the roles played in the FeltexCarpets case by:

i) the directors of FeltexCarpets Limited

ii) the auditor of FeltexCarpets Limited

In particular, discuss fully, referring to the relevant legislation, common law and any other appropriate sources, whether or not you believe that the directors and/or auditor should be held liable for the losses suffered by the shareholders.

b) Furthermore, discuss fully, by consideringeach of the fundamental principles of

PES 1 Ethical Standards for Assurance Providers, whether you believe that the auditor of FeltexCarpets Limited was responsible for any breach(es) of this Standard.