Professional Documents
Culture Documents
Categories of Liabilities
Liability towards client Liability towards third party Liabilities under special cases
Commissioner of IT vs Dandekar
The firm in question maintained two separate books of accounts (for usual business and for black market transactions) Auditor (Dandekar) signed financial statements as correct Income tax dept found assessees income manipulated Auditor not held responsible as they were appointed to prepare IT returns and not to audit accounts
Case Laws
The London and General Bank (1895)
Auditor submitted detailed report to directors on loans to customers where security was insufficient However, he did not disclose it to shareholders No mention in the audit report about it Auditor held liable for misfeasance Auditor was asked to refund the amount of second dividend declared by company
Case Laws
City Equitable Fire Insurance Co (1924)
B/S of company described debts due by companys broker as cash at bank and in hand The sums due by broker to the company was more than what was shown in B/S The broker pledged companys securities which were in its custody. Auditor did not detect this. Auditor obtained certificate from brokers rather than bank in respect of securities held Auditor NOT held liable
Criminal Liabilities
There is both a mental element and physical element to the offence The penalties for criminal offences are fines and imprisonment
Case Laws
Dambell Banking Co. (1900)
False B/S prepared, fact of bad O/D not disclosed with intent to defraud shareholders
Concluded