A review of financial reporting liability lawsuits in Singapore

Abstract

Accountants and auditors around the world have been subject to professional liability lawsuits, as a result of corporate collapses in the wake of the global financial crisis. Some of the reasons for these corporate collapses and bankruptcies have been related to breaches of contract, professional negligence, and the contravention of statutory duties by financial advisors and the failure of auditors to give a true and fair view of a company’s financial position. Auditors are subject to numerous rules and regulations in Singapore. The purpose of this paper is to examine the factors that have caused certified practising accountants and independent auditors in Singapore to be sued by their clients and third party users of financial reports. The answer to this question is of obvious interest to members of the public accounting profession in Singapore and around the world. The major purpose of this paper is to make that question more specific and to gather and analyse evidence that might provide answers. This paper has taken into account lawsuits brought against accountants and auditors in Singaporean courts over the past two decades (1990–2010). It focuses on two types of cases. The first type refers to those where the accountants and auditors were directly sued by their clients, and litigated in a court of law. The second type focuses on matters where the accountants and auditors were not directly sued but were summoned as witnesses or third parties in the litigation.