Question 1â€” Legal Liability Sydney solicitor Bruce Dennis will
be coordinating a class action for some 600 HIH shareholders
against the auditors â€” Andersenâ€™s (as the firm is now known).
In addition, HIH's liquidator, Tony McGrath of KPMG is also likely
to seek to recover funds for HIH creditors. Â
a) Identify and discuss in detail THREE (3) relevant legal concepts which are related to the collapse of HIH.Â In your answer, explain why these principles are relevant - (9 marks).Â b) What conditions need to exist for a negligence action to be upheld? â€“ (3 marks).Â Â Â
Question 2 â€” Ethics The HIH board of directors includes three former partners of the audit firm Arthur Andersen. In the past decade, Andersenâ€™s has earned more than $8 million from auditing HIH books and $7 million for other services. Â
a) Why would HIH have wanted to hire prior members of its external audit team? â€“ (2 marks).Â Â
b) What are the advantages of having the same firm provide both the auditing and consulting services? â€“ (3 marks).Â Â
c) Indicate whether these circumstances represent a violation of ethical standards and give reasons for your answer â€“ (5 marks).Â Â
d) Outline the primary recommendations for audit reform proposed by the introduction of CLERP 9.Â What impacts do you feel these changes will have on the practice of auditing?
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