Question Tag: Professional Negligence

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  • 15 Marks

AAA – Nov 2012 – L3 – SB – Q6 – Auditor’s Legal Liability

This question discusses auditors' responsibilities to shareholders and stakeholders, steps to minimize liability risks, and actions in distressed companies.

In a recent seminar you attended, it was explained that although auditors can incur civil liability under various statutes, it is far more likely that they will incur liability for negligence under common law. The paper presenter mentioned cases against auditors which were in this area. You also learnt that auditors must be fully aware of the extent of their responsibilities, together with steps they must take to minimize the danger claims arising from professional negligence.

Required:
a. Discuss the extent of auditors’ responsibilities to shareholders and other stakeholders during the course of their normal professional engagement. (8 Marks)

b. Outline FIVE steps that audit firms can take to minimize the danger of claims against them. (5 Marks)

c. Itemize TWO steps that must be taken to minimize the danger of claims when the company is deemed to have been distressed. (2 Marks)
(Total 15 Marks)

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  • 1 Marks

BL – Nov 2022 – L1 – SA – Q13 – Law of Tort

Identifying key elements in professional negligence.

Which of the following is a key element in professional negligence?

A. Relationship
B. Duty of care
C. Breach of contract
D. Trust and confidence
E. Duty to disclose

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  • 4 Marks

BL – May 2016 – L1 – SB – Q4a – Law of Tort

Advise on legal action for losses incurred due to professional advice in a business investment.

Femi, an entrepreneur, and his friend Umukan, a Chartered Accountant, are members of the same social club. Femi invited Emike to invest in sachet water business. Emike sought the professional advice of Umukan and paid him a fee for the advice. Umukan informed Emike that Femi’s business was doing well. Emike invested in the business based on Umukan’s professional advice and eventually suffered a loss of ₦350,000. Emike has come to you for advice.

Required:

Advise Emike on his chances of succeeding in a legal action he intends to institute against Umukan.

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  • 4 Marks

BCL – Nov 2016 – L1 – Q6b – Accounts and Audit

Define professional negligence and its implications in a legal context.

Briefly explain what is meant by professional negligence.

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  • 6 Marks

BCL – Nov 2016 – L1 – Q6a – Accounts and Audit

Assess whether Capare Industries Ltd. would be justified in taking legal action against the firm of auditors.

Capare Industries Ltd, which already held shares in a company known as Logotex Co., later made a takeover bid on the strength of its accounts prepared by Dickman Ltd., a firm of auditors. Capare Industries Ltd realized that the accounts were inaccurate in that they showed a pre-tax profit of GH¢1.3 million when in actual fact there had been a loss of GH¢400,000. It was the case of Capare Industries Ltd that if they had known the true situation, they would not have made a bid at the price they did or may not have made a bid at all. They argued that they were owed a duty of care by the auditors as new investors and as existing shareholders who in reliance on the accounts had bought more shares.

Required:
Explain whether Capare Ltd would be justified in taking action against the firm of auditors.

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  • 2 Marks

BCL – Nov 2018 – L1 – Q1e – Tort

State two elements required to establish a case of professional negligence.

State TWO (2) elements of Professional Negligence.

(2 marks)

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  • 2 Marks

BCL – Nov 2018 – L1 – Q1d – Tort

Define professional negligence in the context of tort law.

Explain the term “Professional Negligence.” (2 marks)

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  • 10 Marks

BCL – Nov 2017 – L1 – Q3a – Tort, Contract Law

Discuss whether an investor can take action against an investment company for negligent advice leading to financial loss.

a) Bobo Company Limited puts up an advert in the ‘Daily Times’ newspaper inviting members of the public to purchase shares. Mr. Kobina Fosu, an investor, decided to purchase some of the shares. He consulted an investment firm to advise on whether or not he should purchase the shares of the company. The investment firm advised Mr. Kobina Fosu that the company was buoyant and that its capital base was strong and attractive. As a result, Mr. Kobina Fosu bought a substantial number of shares of the company. Two months after the purchase of the shares, however, the company went bankrupt.

Required:
What advice, if any, will you give to Mr. Kobina Fosu? (10 marks)

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  • 15 Marks

AAA – Nov 2012 – L3 – SB – Q6 – Auditor’s Legal Liability

This question discusses auditors' responsibilities to shareholders and stakeholders, steps to minimize liability risks, and actions in distressed companies.

In a recent seminar you attended, it was explained that although auditors can incur civil liability under various statutes, it is far more likely that they will incur liability for negligence under common law. The paper presenter mentioned cases against auditors which were in this area. You also learnt that auditors must be fully aware of the extent of their responsibilities, together with steps they must take to minimize the danger claims arising from professional negligence.

Required:
a. Discuss the extent of auditors’ responsibilities to shareholders and other stakeholders during the course of their normal professional engagement. (8 Marks)

b. Outline FIVE steps that audit firms can take to minimize the danger of claims against them. (5 Marks)

c. Itemize TWO steps that must be taken to minimize the danger of claims when the company is deemed to have been distressed. (2 Marks)
(Total 15 Marks)

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  • 1 Marks

BL – Nov 2022 – L1 – SA – Q13 – Law of Tort

Identifying key elements in professional negligence.

Which of the following is a key element in professional negligence?

A. Relationship
B. Duty of care
C. Breach of contract
D. Trust and confidence
E. Duty to disclose

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  • 4 Marks

BL – May 2016 – L1 – SB – Q4a – Law of Tort

Advise on legal action for losses incurred due to professional advice in a business investment.

Femi, an entrepreneur, and his friend Umukan, a Chartered Accountant, are members of the same social club. Femi invited Emike to invest in sachet water business. Emike sought the professional advice of Umukan and paid him a fee for the advice. Umukan informed Emike that Femi’s business was doing well. Emike invested in the business based on Umukan’s professional advice and eventually suffered a loss of ₦350,000. Emike has come to you for advice.

Required:

Advise Emike on his chances of succeeding in a legal action he intends to institute against Umukan.

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  • 4 Marks

BCL – Nov 2016 – L1 – Q6b – Accounts and Audit

Define professional negligence and its implications in a legal context.

Briefly explain what is meant by professional negligence.

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  • 6 Marks

BCL – Nov 2016 – L1 – Q6a – Accounts and Audit

Assess whether Capare Industries Ltd. would be justified in taking legal action against the firm of auditors.

Capare Industries Ltd, which already held shares in a company known as Logotex Co., later made a takeover bid on the strength of its accounts prepared by Dickman Ltd., a firm of auditors. Capare Industries Ltd realized that the accounts were inaccurate in that they showed a pre-tax profit of GH¢1.3 million when in actual fact there had been a loss of GH¢400,000. It was the case of Capare Industries Ltd that if they had known the true situation, they would not have made a bid at the price they did or may not have made a bid at all. They argued that they were owed a duty of care by the auditors as new investors and as existing shareholders who in reliance on the accounts had bought more shares.

Required:
Explain whether Capare Ltd would be justified in taking action against the firm of auditors.

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  • 2 Marks

BCL – Nov 2018 – L1 – Q1e – Tort

State two elements required to establish a case of professional negligence.

State TWO (2) elements of Professional Negligence.

(2 marks)

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  • 2 Marks

BCL – Nov 2018 – L1 – Q1d – Tort

Define professional negligence in the context of tort law.

Explain the term “Professional Negligence.” (2 marks)

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  • 10 Marks

BCL – Nov 2017 – L1 – Q3a – Tort, Contract Law

Discuss whether an investor can take action against an investment company for negligent advice leading to financial loss.

a) Bobo Company Limited puts up an advert in the ‘Daily Times’ newspaper inviting members of the public to purchase shares. Mr. Kobina Fosu, an investor, decided to purchase some of the shares. He consulted an investment firm to advise on whether or not he should purchase the shares of the company. The investment firm advised Mr. Kobina Fosu that the company was buoyant and that its capital base was strong and attractive. As a result, Mr. Kobina Fosu bought a substantial number of shares of the company. Two months after the purchase of the shares, however, the company went bankrupt.

Required:
What advice, if any, will you give to Mr. Kobina Fosu? (10 marks)

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