Simean & Co, a firm of CPA's, issued an unqualified audit report for its client, Xiing Manufacturing Corporation, a footwear manufacturer in Asia. Xiing Manufacturing, listed its head office in Toronto, Ontario, and its shares were traded on a Canadian Stock Exchange. Besides the shareholders, Simean & Co. knew the company was in the process of refinancing a significant bank loan coming due, and the bank was anxious to see the year end results. After an unqualified audit report was issued, the regulator of the stock exchange halted the trading of the shares after allegations of management fraud came to light. As a result, the share price plummeted and the company went out of business.
Required:
(a) To whom did Simean & Co. owe a duty of care?
(b) What must the bank demonstrate to establish negligence?
(c) What are the defences available to Simean & Co?

Question

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The Answer of Simean & Co, a firm of CPA's, issued an unqualified audit report for its client, Xiing Manufacturing Corporation, a footwear manufacturer in Asia. Xiing Manufacturing, listed its head office in Toronto, Ontario, and its shares were traded on a Canadian Stock Exchange. Besides the shareholders, Simean & Co. knew the company was in the process of refinancing a significant bank loan coming due, and the bank was anxious to see the year end results. After an unqualified audit report was issued, the regulator of the stock exchange halted the trading of the shares after allegations of management fraud came to light. As a result, the share price plummeted and the company went out of business.
Required:
(a) To whom did Simean & Co. owe a duty of care?
(b) What must the bank demonstrate to establish negligence?
(c) What are the defences available to Simean & Co?

Simean & Co, a Firm of CPA's, Issued an Unqualified