Case Law Details
Price Waterhouse & Co. Bangalore LLP & Ors. Vs SEBI (SAT Mumbai)
SAT Held that Order of Whole Time Member (WTM) of SEBI debarring the PW firms to audit listed company on the ground of PW network or projecting it as a PW brand cannot be sustained.
There is no doubt that there has been a professional lapse on the part of the auditors in conducting the audit especially their failure to seek direct confirmation from the Bank relating to Bank Balances and fixed deposits. These lapses amounted to negligence. Action has already been taken by ICAI against the auditors. Negligence is the breach of duty caused by omission to do something which a reasonable man is guided by these considerations to do something which a prudent and reasonable man would not do so. Negligence becomes actionable on account of a lapse or omission amounting to negligence. In the concept of negligence amounting to an offence, the element of mens rea must be shown to exist, but under Torts, negligence becomes actionable on account of lapse or omission. Once you breach your duty, negligence becomes actionable as there has been a failure to attain that standard of care.
A professional such as an auditor comes under a category of persons professing some special skill. Any task which is required to be performed with a special skill would generally be undertaken to be performed only if the person possesses the requisite skill for performing that task. The only assurance which such professional can give is, that he is possessed of the requisite skill in that branch of profession which he is practicing and that he would be exercising his skill with reasonable competence. This is what a person / Company approaching the professional can expect.
Thus, a professional may be held negligent if he is not possessed of the requisite skill which he professed to have possessed or he did not exercise with reasonable competence. The standard to be applied for judging whether the person charged has been negligent or not, would be that of an ordinary competent person exercising ordinary skill in that profession. It is not necessary for that person to possess the highest level of expertise in that branch which he practices.
Please become a Premium member. If you are already a Premium member, login here to access the full content.
