Review of Auditing Issues in AWA Case

The AWA deals with the management and audit of various roles in the financial administration of the Australian audit firms. It consists of an accounting system that records the foreign exchange transactions that are conducted in the numerous financial environments. The AWA case therefore deals with auditing activities that are essential in the proper supervision of foreign exchange management as well as managing actions under the legal proceedings of the particular audit firms (Malane, 2005). Various elements are considered during the audit period, which include planning, procedures, provision of high-quality audits, forensic and audit independence. The AWA Case [AWA Ltd v Daniels Deloitte Haskins & Sells (1992) 10 ACLR 933; Daniels v Anderson (1995) 13 ACLC 614], made decisions regarding the issues that had been involved during the auditing processes, to which the auditors had been negligent in their role, thus leading to damages to the auditors, directors and the other professionals (du Plessis & de Koker, 2017). In this article, the audit issues and failures during the processes will be detailed as pertaining to cases involved in the AWA, and how the authorities can solve the numerous failures experienced in the audit organization structure.

Review of auditing issues in AWA Case

The case of AWA vs Daniel had been regarded as the leading Australian authority that addressed the issues surrounding negligence of the auditors and the implications of the punishments given to both. In previous cases, if an external auditor was negligent, the Australian court would allocate the auditor full consequences of the negligence, while in the AWA Case, the negligent auditor defence succeeded and the damages of the negligence were awarded proportionately between the auditor and the company that was involved. This article therefore analyses the various auditing issues that were addressed and the audit failures that occurred in the AWA Case. The negligence of the auditors had been a violation of the general law of the duties of an auditor, and were therefore guilty of the crime. This meant that the Companies Code 1981(“the Code”) had been broken as they had failed to work with the guidelines as stated, according to Plessis & Koker (2017). It states that the auditor must be able to form opinions on their own about proper accounting records as kept by the company as well as state any failures or challenges incurred during the auditing processes. The company is also expected to be aware of its accounts or financial positions at all times in the company to ensure that the company is not sued for any damages or breaches. In this case, both the company and the auditor should be aware of the company’s financials to ensure that no breach of duty occurs, in this case, negligence of the auditors that eventually bring losses to the entire firm.

In the case of AWA vs Daniel, the foundation that both the auditor and the company were apportioned the losses as incurred, was a breach of duty according to the Contributory Negligence Act (”the 1945 Act”). It stated that contributory negligence was also a breach of duty during the processes of auditing. This was different from the Bourke vs Butterfield and Lewis Limited (1926), where the High Court had ruled that contributory negligence required no course of action for the damages incurred for personal injury, as it was also a breach of statutory duty. It therefore meant that the auditor was guilty of the breach of duty and losses incurred were not shared with the company.

The auditors however, have argued that the actions against the breach of statutory duty would remain as a complete bar against the auditor as the contributory negligence could not be pleaded for expect in personal injuries. The law did not protect them against personal injury as the Act did not incorporate the contributory negligence at the time of ruling. It was however, a law that had not been given provenance as the negligence was a defence in common law, and required a call for action. During the auditing, the issues that were addressed did not consider the damages that the breach of statutory duty had imposed on the defendant, according to the 1965 Act of Statutory Duties (Contributory Negligence) The amendment that was made was according to the 1945 Act, which did not consider the contributory negligence as a defence that could be used by the auditor for a claim (du Plessis & de Koker, 2017).

Recommendations for reforms

When the AWA Case implications did not consider the contributory negligence according to the 1965 Act, the breaches of the statutory duties were not fully covered and there were no claims for nay personal injuries that had been covered. The losses of personal injuries as well as damages that had been caused by breach of duty were not considered in this ruling, something that should have been given as much defence as the other claims in property. I recommend however, that the contributory negligence should be absorbed in the new reforms, and that the parties involved must submit admissions that allow for apportionment of losses in cases of events like this in the future.

It is also advisable that the idea of forensic phases in dealing with the various breaches of statutory duties; which involves the use of business evaluations, fraud investigations and litigation support to calculate the scope of breach of statutory duty (Kranacher, Riley, et al.,2010). An examination that is taken to understand the company’s evaluation, as well as the financial status of an individual, can be used to determine the type of breach that has been identified and the extranet of losses incurred from the breach. It is a recommendation that companies adopt this kind of auditing schemes to ensure that the company is able to keep the accounts in check, while being in complete awareness about the work of the individual auditors.

Observations

From the AWA vs Daniel Case, there I observed that the failures of the management was that the company did not take into account the financials and therefore suffered the apportionment from the negligence of the auditors. This means that as much the contributory negligence works, the parties responsible attach the losses incurred in the various degrees of portions, as the auditors have the defence. It is also essential to understand that both the auditor and the company are required to understand the levels of apportionment from the calculated losses. The use of various auditing processes can be very fundamental for the success of any business, as nit can also help the company to avoid instances of breaches of the statutory duties, which would eventually lead to losses by the company at large, as apportionment affects the company is certain levels.  

References

du Plessis, J. J., & de Koker, J. N. (2017). Analyses, perspectives and jurisdictional overview.

In Disqualification of Company Directors (pp. 39-69). Routledge.

Kranacher, M. J., Riley, R., & Wells, J. T. (2010). Forensic accounting and fraud

examination. John Wiley & Sons.

Malane, F. (2005). The standard of care and responsibility required of auditors in the

detection of fraudulent or illegal activity: the AWA case

(Doctoral dissertation, Victoria University).