AUDITOR LIABILITY AND THE DEVELOPMENT OF A STRATEGIC EVALUATION OF GOING CONCERN

This paper addresses various aspects of the auditor liability problem in Australia. It identifies, as the fundamental cause of the auditor liability problem, the moral and ethical degradation of the accountancy profession and, as a derivative thereof, its intellectual impoverishment. It indicates a significant imbalance between self-interest and public-interest in the profession. This imbalance is supported with an examination of the resolute efforts which were actioned by powerful members of the profession to control the initiatives which were taken to protect a small minority of members, including themselves, from damage awards. It examines the success which those parties had in bringing about the introduction of an act of parliament to cap damages awarded by a judge and it explores the obnoxious scheme that was enacted under that act to protect wrongdoers from the payment of just, fair, and equitable damages to their victims. The paper indicates that the profession did not do its job properly and that, accordingly, it is not so much the victim as it is the culprit. The paper identifies the evaluation of the going concern basis as being fundamentally flawed and, thereby, as being a basic cause of auditor liability. It suggests the introduction of a multi-disciplinary approach to such evaluations utilizing, amongst other things, strategic management dimensions. It also proposes an order of magnitude expansion of the role of going concern basis evaluations. The paper indicates that the profession is a victim of itself. It concludes with the observation that the accountancy bodies are myopic and that they are not learning organizations. This situation, it states, must change.