Advised an accountancy practice in relation to allegations of negligence against its external accountants for failing to detect a basic fraud being committed by its In-House Finance Manager. The fraud related to creation of false training accounts to allow a lifestyle fraud to be perpetrated through the diversion of monies. Regular visits for bookkeeping services were provided by the accountants and it was alleged that they failed in their duty of care to detect the fraud that had occurred as it had taken place over a period of four years.
The client company was under the audit threshold which meant that the duty of care of accountants are different to those advising on audit. Particular attention had to be paid to the details of the engagement terms between the accountant and the client company. This was to identify their duty of care in order to seek recovery of losses caused by their failure to detect what was ultimately a simplistic fraud.