Financial Statement and Auditing Errors Associated with the Lawsuits Against Public Accountants in Australia and Singapore

Abstract

This paper considers the legal liability regime for financial advisors, namely certified public accountants and auditors, in Singapore and Australia. Examination of the comparative aspects in which lawsuits against financial advisors are commenced provided an analysis of the legal and commercial environment and the regulatory regimes of the two jurisdictions considered. Information was collected from a wide range of sources including articles, texts, government reports and professional body publications. The main basis of the paper however, was a detailed analysis of a number of court cases in Singapore and Australia. A qualitative, legal case-study method was used to meet the following objectives: (i) description of background information for the lawsuit, (ii) explanation of information collected, and (iii) analysis of the information in the context of the research topic. After a wide search on a number of different legal databases in Australia and Singapore, eleven and eight relevant cases were chosen from each jurisdiction respectively. The case analysis was conducted to develop an understanding of the complex reasons that initiated the litigation process against the professional accountant or auditor where many variables are not quantifiable and actual causes for legal action significantly vary from one case to the other. These cases were evaluated to consider a range of issues including the court jurisdiction, main issues contributing to the litigation, types of alleged errors and findings of liability. Consequently it appeared that even though the two countries have similar regulatory regimes for financial advisors, there were a surprising range of differences in the legal and commercial environment in which claims were brought by parties. These differences highlighted the positive and negative aspects of the varying approaches and allowed the paper to make a range of recommendations for Australia, Singapore and the accounting profession at large. These recommendations include a strict approach to legal liability for advisors, enacting measures to limit the liability of advisors and the requirement and importance of good corporate governance approaches.