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Auditing: Principles and Techniques by S. K. Basu

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Annexure A

Important Case Decisions

1. LEEDS ESTATE BUILDING AND INVESTMENT CO. VS SHEPHERD (1887)

Subject

Auditor’s liability for not studying the Articles of Association of the company.

Fact

In this case, the auditor had not discovered that certain payments relating to dividends, directors’ fees and bonus were irregular. This was because, he had not concerned himself with the company’s Articles of Association. He was held liable for damages.

Legal View

This case had established that it is not sufficient for an auditor to concern himself with the arithmetical accuracy of the books and accounts. He has a duty to ensure that the transactions are in order. When an auditor takes over a company audit, one of his first actions is to obtain a copy ...

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