- 15 Marks
AAA – May 2024 – L3 – SC – Q5 – Auditor’s Legal Liability
Assess the auditor's legal position and requirements for due care in Globamedia's case, and outline preventive steps.
Question
Globamedia is a company listed on The Nigerian Exchange (NGX) and is a long-established media company. In the last three years, it made some losses, though it is making investment in digital publishing. This investment and the company’s projected sound future prospects have led to a good market rating since it was generally seen that this digital publishing is a leading edge in the media industry. Its investments have been funded through the use of reserves built over many years.
However, a few weeks ago, Globamedia’s shares were suspended, having fallen by more than the stipulated threshold by The Nigerian Exchange Group on rumors that asset values have been significantly overstated and that the company was no longer financially viable. Your firm as the auditors has come under significant criticism and is considered as being negligent.
Required:
a. Evaluate the legal position of your firm. (5 Marks)
b. Discuss the requirements for due care. (5 Marks)
c. Highlight the steps and procedures that the firm could have taken to prevent such a situation from occurring. (5 Marks)
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