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0.0. Table of Cases
1. Al Saudi Banque v. Clark Pixley, [1989] 3 All ER 361.
2. Anns v. London Borough, [1977] 2 All ER 492.
3. Candler v. Crane, Christmas & Co., [1951] 1 All ER 426.
4. Cann v. Willson, (1888) 39 ChD 39.
5. Caparo Industries plc v. Dickman, [1990] 1 All ER 568.
6. Deputy Secretary v. S.N. Das Gupta, (1955) 25 Com Cas 413.
7. Harris v. Wyre Forest District Council, [1989] 2 All ER 514.
8. Hedley Byrne and Co. v. Heller & Partners, [1963] 2 All ER 575.
9. In Re City Equitable Fire Ins. Co., [1924] All ER Rep 485.
10. In Re Kingston Cotton Mills, [1896] 2 Ch. 279.
11. In Re London and General Bank, [1895-96] All ER Rep 953.
12. Institute of Chartered Accountants v. P.K. Mukherjee, AIR 1968 SC 1104.
13. James McNaughton Papers Group Ltd. v. Hicks Anderson & Co., (1991) 2 QB 113.
14. JEB Fasteners Ltd. v. Marks Bloom & Co., [1983] 1 All ER 583.
15. London Oil Storage Co. v. Seear Hasluck & Co., (1904) 30 Acct. L.R 93.
16. Morgan Crucible Co. Plc v. Hill Samuel Bank Ltd., [1991] 1 All ER 148.
17. Smith v. Eric S Bush, [1989] 2 All ER 514.
18. Twomax Ltd. v. Dickson, McFarlane & Robinson, 1984 SLT 424.
19. Ultramares Corporation v. Touche, (1931) 255 NY 170.
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1.0. Introduction
The collapse of the energy monolith, Enron, and the failure of Arthur Anderson, the firm
that audited Enron’s accounts, to identify the rot in the company have been one of the biggest
stories to hit the market in the last one year. As a result, the law relating to the auditor’s liability
has once again come into focus.
In the present day setup, the sweeping changes that liberalization has brought in, along
with recent instances of embezzlement, have shaken investor confidence. As a result, the role
of regulators and inspectors such as auditors has been brought into prominence. Auditors are
now increasingly being seen as the authorities, who can check the abuses and irregularities in
the financial aspects of the companies, thus safeguarding the interests of the shareholders and
investors. In view of such high expectations, “highest standard of care in accounting” has come
to be expected out of the auditors and liability is sought to be imposed upon them for any
deviation from the expected “high standards”.
In consonance with this throughout the decades of the 1960s, 1970s, and 1980s there
had been an increasing trend of the judicial expansion of the number of third parties to whom an
accountant can be held liable. In fact, this period has been described as the “dark ages” of
liability for auditors. However, since the 1990s an international trend has emerged toward a
narrower scope of accountant liability to non-clients for negligence.
This significant reversal in judicial trend has been brought about by landmark decisions
such as Caparo Industries plc v. Dickman,1 which is the subject matter of review in the present
project report.
1
[1990] 1 All ER 568.
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2.0. Research Methodology
2.1. Aims and Objectives
This project assignment aims to review the landmark judgment of the House of Lords in
the case of Caparo Industries plc v. Dickman and Others. The objective of this project
assignment is to examine the said judgment threadbare and to examine the importance of the
same in context of the larger issue of auditor’s liability.
2.2. Scope
The scope of this project is limited to the analysis of the judgment delivered by the
House of Lords and to the study of auditor’s liability, especially with respect to third parties.
2.3. Research Questions

What did the House of Lords in Caparo Industries plc v. Dickman and Others lay down?

What is the critique, if any, of the decision of the House of Lords?

What is the importance of the judgment in the larger context of auditor’s liability?

What liability does an auditor owe to the various stakeholders in the society?
2.4. Style of Writing
Both analytical and descriptive styles of writing have been used in this project. While an
attempt has been made to analyze the dictum of the law Lords; the enunciation of the principles
and the relevant case law is mainly descriptive.
2.5. Sources of Data
Both primary and secondary sources of data in the form of books and case law have
been used in this project. The materials used for this research paper include articles, case law
and books.
2.6. Mode of Citation
A uniform mode of citation has been used throughout this project.
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3.0. Caparo Industries plc v. Dickman and Others2: Case Review
3.1. Facts of the Case
Fidelity Plc (hereinafter referred to as "Fidelity") was a public company, which had a
listing on the Stock Exchange since 1974, specializing in the manufacture and sale of consumer
electrical goods such as televisions, integrated rack units, record players, tape recorders and,
subsequently, cordless telephones.
On 31st March, 1983 Fidelity, issued its annual accounts for the end of the year, 31
March 1983, producing a profit of £830,000 according to the accounts. Thereafter, on 20th of
July, 1983 Fidelity issued a rights issue circular proposing to increase their nominal capital by
£0.3m, which contained a forecast from the directors that the profits for the year ending 31
March 1984 would be not less than £2.2m.
In early March, 1984 the market price for Fidelity's ordinary 10p shares was in the range
of 145p top to 120p low per share. On 12th of March, 1984 Fidelity issued a press release to the
effect that in view of certain technical production difficulties, the directors took the view that the
profit to the year ending 31 March 1984 would fall significantly short of £2.2m. As a result of the
press release the market price of Fidelity’s shares immediately dropped to a level of 90p.
On 22nd May, 1984 the directors of Fidelity announced the results for the year ended 31st
March, 1984. These revealed that profits for the year fell well short of the figure which had been
predicted, and this resulted in a dramatic drop in the quoted price of the shares.
Fidelity's accounts for the year to 31st March, 1984 had been audited by the appellantauditors, Touche Ross. On 21st May, 1984 Touche Ross signed their annual report, which was
unqualified and to that report was annexed the consolidated balance sheet and consolidated
profit and loss account and the balance sheet for the year ending 31st March.
The accounts had been approved by the directors on the day before the results were
announced. On 12th June, 1984 they were issued to the shareholders, with notice of the annual
2
[1990] 1 All ER 568.
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general meeting, which took place on 4th of July, 1984 and at which the auditors' report was
read and the accounts were adopted.
Following the announcement of the results, the respondents, Caparo Industries Plc
(hereinafter referred to as “Caparo”) began to purchase shares of Fidelity in the market.
On 8th of June, 1984, Caparo purchased 100,000 shares but it was not registered as
members of Fidelity until after 12th June, 1984, when the accounts were sent to shareholders;
although they had been registered in respect of at least some of the shares which they
purchased by the date of the annual general meeting, which they did not attend. On 12th June,
1984 Caparo purchased a further 50,000 shares, and by 6th of July, 1984 they had increased
their holding in Fidelity to 29.9% of the issued capital.
On 4th of September, 1984 Caparo made a bid for the remainder at 120p per share, that
offer being increased to 125p per share on 24 September 1984.
The offer was declared
unconditional on 23 October 1984, and two days later Caparo announced that it had acquired
91.8% of the issued shares and proposed to acquire the balance compulsorily, which it
subsequently did.
Following the take-over, the respondents brought an action against the auditors of the
company, alleging that:
-- the accounts of Fidelity were inaccurate and misleading in that they showed a pre-tax
profit of some £1.2m for the year ended 31 March 1984 when in fact there had been a loss of
over £400,000,
-- the auditors had been negligent in auditing the accounts,
-- the respondents had purchased further shares and made their take-over bid in
reliance on the audited accounts, and
-- the auditors owed them a duty of care either as potential bidders for Fidelity because
they ought to have foreseen that the 1984 results made Fidelity vulnerable to a take-over bid or
as an existing shareholder of Fidelity interested in buying more shares.
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3.2. List of Dates and Events
Date
July, 1983
8th
July,
1983
July, 1983
November,
1983
26th March,
1984
Event
The directors of Fidelity announce
their proposal to raise additional
working capital of approximately
£3.9 million by a rights issue of one
new ordinary share for every three
ordinary shares held at that date at
a price of 145 pence per share.
A press release issued by Morgan
Grenfell, the Merchant Bank which
underwrote the rights issue, states
that:
"Although it is relatively early in the
financial year, the directors feel able
to forecast that, in the absence of
unforeseen circumstances, pre-tax
profits for the year ending 31st
March 1984 will be not less than
£2.2 million. The bases and
assumptions on which this forecast
is made are contained in a circular
setting out the details of the issue
which is to be despatched to
shareholders later today."
In the same press release the
directors announce their intention to
recommend, in respect of the year
ending 31st March 1984, dividends
of not less than three pence per
share on the share capital as
enlarged by the proposed rights
issue
Morgan Grenfell and Touche Ross,
the company's auditors, each write
a comfort letter in respect of the
profit forecast of £2.2 million.
The unaudited half-year results to
30th September 1983 show a pretax profit of £766,000. It is also
announced that, in view of the
satisfactory results and the prospect
of good trading conditions, the
directors were recommending the
payment of an interim dividend of
one pence per ordinary share
payable on 18th January 1984.
Touche Ross writes to Morgan
Grenfell a letter saying that they
had discussed and reviewed
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12th
March,
1984
Fidelity's revised estimate of profits
for the year ending 31st March
1984, which were £1.395 million for
the group (being the company and
its subsidiary Highfield Cabinets
Ltd), contrasted with the earlier
forecast of £3.385 million. The letter
states:
"Our
principal
findings
and
conclusions are:
-- that the group is highly unlikely to
make a pre-tax profit of £1.395
million for the year to 31 March
1984. The Chairman and Chief
Executive informs us that he has
reservations as to the final figure
because of the possible effect of
stock adjustments. We agree that
given the continued lack of an
integrated detailed costing system a
forecast in advance of a full
physical stock take at 31 March is
extremely difficult. We also feel that
the profit estimate will be very
difficult to achieve due to concerns
in the following areas….
-- that the pre-tax forecast included
in the rights issue document of £2.2
million was not made recklessly or
irresponsibly,
-- that at the time of the interim
announcement in November 1983
the board were aware that the
estimated out turn for the year
would be significantly below the
£3,385,000 initial internal forecast.
They did not know, and probably
could not have been expected to
know, the severity of problems
which were to arise soon thereafter,
so that not even the £2.2 million
pre-tax
forecast
would
be
achieved."
Morgan Grenfell issues a press
release stating that the directors
were now of the opinion that the
pre-tax profit for year ending 31st
March 1984 would fall significantly
short of that of £2.2 million forecast
at the time of the rights issue.
Explanations are given for this
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21st May,
1984
22nd May,
1984
1st June,
1984
8th June,
1984
8th June,
1984
12th June,
1984
12th June,
1984
shortfall, but the notice concludes,
in words that foreshadow those of
the First Defendant in the Annual
Report issued three months later,
that the difficulties which had led to
the shortfall had been overcome.
The board approves the accounts
for the year ending 31st March
1984 to which Touche Ross, the
auditors, have given a clean
certificate.
The
results
are
announced,
including the pre-tax profit figure of
£1.310.
The price of the company’s share
falls to 63 pence from the previous
high of 143 pence on 1st March,
1984.
Deric Holmes of Le Mare Martin,
stockbrokers, who had been
consulted
by
the
Plaintiffs
("Caparo"), approach Mr Leek,
Caparo's Chief Executive, to
discuss Fidelity.
Caparo makes their first purchase
of 100,000 Fidelity shares at 70
pence per share.
Caparo purchases a further 50,000
shares at 73 pence.
Fidelity's Annual Report and
Financial Statement are issued to
shareholders.
The
Chairman's
Report includes the following:
"Results
Profits before tax rose from £80,000
to £1,310,000 continuing the
consolidation in the recovery started
last year. Sales increased from
£33,388,000 to £41,076,000, an
improvement of 23 per cent.
These figures would be satisfactory
in normal circumstances; however,
they are disappointing in view of the
shortfall in profits on the forecast
made at the time of the rights issue
in July 1983. The shortfall was
caused by unforeseen technical and
production difficulties that we
encountered with the introduction of
a new chassis used throughout the
range of colour televisions. In
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18th June,
1984
20th June,
1984
21st June,
1984
4th
July,
1984
9th
July,
1984
18th July,
1984
30th July,
1984
4th Sept.,
1984
addition, unexpected delays were
experienced
with
the
tests
specification for the cordless
telephones which had to be
resolved before the production
programme could continue. As a
result, approximately one-third of
the planned production will not be
completed before September this
year.
These difficulties have now been
overcome, and production of the
cordless telephones and colour
televisions is going according to
plan."
Caparo notifies the Stock Exchange
and Fidelity that it owns 5.8 per cent
of the shares in Fidelity, as required
by the City Code.
Fidelity
appointes
the
First
Defendant
and
Mr
Ouaknin,
Finance Director, Fidelity, as a
committee to deal with offers for the
shares.
The First Defendant writes a letter
to shareholders saying that the
prices paid for its shares by Caparo
"seriously undervalue the true worth
of your company. Furthermore, the
current share price of 95 pence
does not in any way reflect your
company's
excellent
long-term
prospects . . ."
Fidelity's annual general meeting is
held and the shareholders approve
the accounts.
Caparo announces that it holds
18.4 per cent of the shares.
The First Defendant reports to a
board meeting of Fidelity that
Caparo had no intention of making
a bid.
Caparo announces that it has
acquired 29.9 per cent of the shares
in Fidelity.
Caparo announces that it had that
day bought a further 270,000
shares at 120 pence per share and
announces its offer, subject to
further terms and conditions, of 120
pence for each ordinary share.
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5th Sept.,
1984
21st Sept.,
1984
24th Sept.,
1984
3rd
October,
1984
22nd Oct.,
1984
23rd Oct.,
1984
24th Oct.,
1984
31st Dec.,
1988
24th July,
1985
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The board of Fidelity issues a press
release through Morgan Grenfell in
which it is stated, inter alia, that:
"The board of Fidelity . . . has no
hesitation
in
unanimously
concluding that the terms of this
unsolicited
offer
significantly
undervalue Fidelity's longer term
potential . . . and that this offer will
not
be
recommended
to
shareholders."
An agreement in principle is
reached between Caparo and
Fidelity that Fidelity's board should
recommend Caparo's increased
offer of 125 pence per share.
Kleinwort Benson, who are acting
for Caparo, announce that an
agreement had been reached.
Kleinwort Benson circulate a formal
recommended
offer
Fidelity's
shareholders.
The offer is approved by Caparo's
shareholders at an extraordinary
general meeting.
The offer is declared unconditional
in all respects.
At a meeting of the board of
Fidelity, Mr Wiltshire resigns as
Chairman and director of Fidelity.
Mr Paul Caparo is elected
Chairman in his place and Mr Leek
and Doctor Hanna, both also of
Caparo, are appointed directors.
Caparo closes down Fidelity's
operations.
Caparo issues a writ against the
defendants, with the Statement of
Claim specially endorsed upon it.
3.3. Question For Consideration
With the issuance of a writ indorsed with a statement of claim by Caparo claiming
damages against the third defendants, Touch Ross and Co for negligence, the preliminary
question that came up for consideration of the Court was:
“Whether on the facts set out in the relevant paragraphs of the Statement of Claim, the
Third Defendants, Touche Ross & Co., owed a duty of care to the Plaintiffs, Caparo
Industries plc,
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(a) as potential investors in Fidelity Plc or
(b) as shareholders in Fidelity Plc from 8 June 1984 and/or from 12 June 1984 in respect of
the audit of the accounts of Fidelity Plc for the year ended 31 March 1984 published on
12 June 1984.”
3.4. Basis of the Claim
The claim against the Touche Ross & Co, who were the auditors of the company Fidelity
was based on the contention that:
Touche Ross, as auditors of Fidelity carrying out their functions as auditors and certifiers
of the accounts in April and May 1984, owed a duty of care to investors and potential investors,
and in particular to Caparo, in respect of the audit and certification of the accounts because:
(a) Touche Ross knew or ought to have known –
(i)
that in early March 1984 a press release had been issued stating that profits for
the financial year would fall significantly short of £2.2m
(ii) that Fidelity's share price fell from 143p per share on 1st March 1984 to 75p per
share on 2nd April 1984
(iii) that Fidelity required financial assistance.
(b) Touche Ross therefore ought to have foreseen that Fidelity was vulnerable to a takeover bid and that persons such as Caparo might well rely on the accounts for the
purpose of deciding whether to take over Fidelity and might well suffer loss if the
accounts were inaccurate.
3.5. Decisions of the Lower Courts
3.5.1. Decision of the Queen’s Bench
On the trial of the preliminary issue Sir Neil Lawson, sitting as a judge of the
Queen's Bench Division, held
(i) that the auditors owed no duty at common law to Caparo as investors, as there was
no close or direct relationship that could give rise to a duty of care, and
(ii) that, whilst auditors might owe statutory duties to shareholders as a class, there was
no common law duty to individual shareholders such as would enable an individual
shareholder to recover damages for loss sustained by him in acting in reliance on the
audited accounts.
3.5.2. Decision of the Court of Appeal
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Caparo appealed to the Court of Appeal, which, by a majority (O'Connor LJ
dissenting) allowed the appeal holding that
(i) there was no relationship between an auditor and a potential investor sufficiently
proximate to give rise to a duty of care at common law, but
(ii) an auditor had a duty of care to individual shareholders, so that an individual
shareholder who suffered loss by acting in reliance on negligently prepared
accounts, whether by selling or retaining his shares or by purchasing additional
shares, was entitled to recover in tort.
From the decision of the Court of Appeal the auditors appealed to the House of Lords,
with the leave of the Court of Appeal, and Caparo cross-appealed against the rejection by the
Court of Appeal of their claim that the auditors owed them a duty of care as potential investors.
3.6. Ratio Decidendi of the Pronouncement of Law Lords
The House of Lords after a careful examination of landmark cases on negligent
misstatement and the criteria to be used to determine the existence and the scope of the duty of
care, unanimously held that:
(1) The three criteria for the imposition of a duty of care were
(a) foreseeability of damage,
(b) proximity of relationship, and
(c) the reasonableness or otherwise of imposing a duty.
(2) In determining whether there was a relationship of proximity between the parties; the
court, guided by situations in which the existence, scope and limits of a duty of care had
previously been held to exist rather than by a single general principle, would determine
whether the particular damage suffered was the kind of damage which the defendant was
under a duty to prevent and whether there were circumstances from which the court could
pragmatically conclude that a duty of care existed:
(3) Where a statement put into more or less general circulation might foreseeably be relied
on by strangers for any one of a variety of different purposes which the maker of the
statement had no specific reason to anticipate, there was no relationship of proximity
between the maker of the statement and any person relying on it; unless it was shown that
the maker knew that his statement would be communicated to the person relying on it,
either as an individual or as a member of an identifiable class, specifically in connection
with a particular transaction or a transaction of a particular kind and that that person
would be very likely to rely on it for the purpose of deciding whether to enter into that
transaction
(4) The auditor of a public company's accounts owed no duty of care to a member of the
public at large, who relied on the accounts to buy shares in the company, because the court
would not deduce a relationship of proximity between the auditor and a member of the
public when to do so would give rise to unlimited liability on the part of the auditor.
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(5) An auditor owed no duty of care to an individual shareholder in the company who
wished to buy more shares in the company, since an individual shareholder was in no better
position than a member of the public at large and the auditor's statutory duty to prepare
accounts was owed to the body of shareholders as a whole.
(6) The purpose for which accounts are prepared and audited is to enable the shareholders
as a body to exercise informed control of the company and not to enable individual
shareholders to buy shares with a view to profit.
Hence, it followed that the auditors did not owe a duty of care to the respondents either
as shareholders or as potential investors in the company. The appeal was therefore, allowed
and the cross-appeal dismissed.
3.7. Analysis of the Judgment
This decision of the House of Lords, in which Lords Bridge, Oliver and Jauncey set out
at length the reasons behind their decision, has come to be considered as an important
landmark in the context of the law on negligent misstatements by professional people, which
cause economic loss. The unanimous decision of the House of Lords has the following
characteristics:

Their Lordships in the instant case were reluctant to extend the situations where a duty
of care for negligent statements may arise beyond those recognised by the authorities
and thus rejected the more modern approach of applying recognised principles to a
situation regardless of whether or not it is covered by authority.

They agreed that foreseeability alone was not sufficient to impose such a duty and that
the requiste relationship of proximity should also be present to limit what would
otherwise be an unlimited duty of care owed by auditors for the accuracy of their
accounts to all who may foreseeably rely on them.

Lord Bridge found that the limit imposed upon the liability for causing economic loss,
rested in the necessity to prove, ‘as an essential ingredient of the “proximity” between
the plaintiff and the defendant, that the defendant knew that his statement would be
communicated to the plaintiff… specifically in connection with a particular transaction….
(e.g. in a prospectus inviting investment) and that the plaintiff would be very likely to rely
on it for the purpose of deciding whether or not to enter upon that transaction….’

Lord Oliver agreed there was no support for the proposition that the relationship of
proximity is to be extended beyond circumstances in which advice is tendered for the
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purpose of the particular transaction and the adviser knows or ought to know that it will
be relied on by a particular person in connection with that transaction.

Lord Jauncey considered that the possibility of reliance on a statement for an
unspecified purpose will not impose a duty of care on the maker of the addressee. Even
if the reliance was probable, regard must be had to the transaction of the purpose of
which the statement was made.

Their Lordships referred to Cann v. Willson,3 Ultramares Corporation v. Touche,4 the
dissenting judgment of Lord Denning in Candler v. Crane, Christmas & Co.5, approved
by the House of Lords in Hedley Byrne and Co. v. Heller & Partners 6 and the two
appeals of Smith v. Eric S Bush and Harris v. Wyre Forest District Council, 7 both of
which had been heard together by the House of Lords, as their authority for these
propositions.

Their Lordships felt that the ratio of the above mentioned cases led to the conclusion
that auditors owe no duty of care to members of the public at large who rely on the
accounts to buy shares, as, if it did, the duty would then extend to all who rely on the
accounts such as investors deciding to buy shares, lenders or merchants extending
credit.

Even the fact that a company is vulnerable to take-over at the time the accounts are
prepared cannot per se create the relationship of proximity. In fact, in Al Saudi Banque v.
Clark Pixley,8 Justice Miller had rejected a claim that auditors owed a duty of care to a
bank and their Lordships agreed with the decision.

Their Lordships questioned the purpose behind the statutory requirement for an annual
audit, and concluded that it is to enable shareholders to review the past management of
the company and to exercise their rights to influence future management. They saw
nothing in the statutory duties of an auditor to suggest that they were intended to protect
the interests of the public at large or investors in the market in particular. The statutory
duty was, therefore, owed to shareholders as a body and not as individuals. Since an
auditor owed no duty to an individual shareholder, it followed that he could owe no duty
to a potential investor.
3
(1888) 39 ChD 39.
(1931) 255 NY 170.
5
[1951] 1 All ER 426.
6
[1963] 2 All ER 575.
7
[1989] 2 All ER 514.
8
[1989] 3 All ER 361.
4
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
15
Their Lordships were not prepared to widen the scope of duty to include loss caused to
an individual by reliance upon the accounts for a purpose for which they were not
supplied and were not intended, as to do so would be to extend it beyond the limit
deducible from the previous decisions of the House of Lords.

The judgment however, does not make clear whether there is a duty to protect individual
shareholders from losses in the value of the shares they hold.
3.8. Critique of the Judgment
This decision of law Lords has been the subject of consideration of a number of jurists
around the world. Some of them have criticized this judgment of the House of Lords on the
ground that the annual accounts of a company and the audit certificates are public documents
and accordingly, persons dealing with the company had constructive notice of the state of affairs
of the company as these documents are filed with the Registrar of Companies. Therefore,
auditors and accountants should be responsible to investors, creditors and others who deal with
the company accounts.
However, the Report of the Committee on the Financial Aspects of Corporate
Governance9 while acknowledging the presence of such criticism has stated that:
“5.32 … The case has aroused controversy because it exposed two widely held
misconceptions:
(a) that the audit report is a guarantee to the accuracy of the accounts, and perhaps even as
to the soundness of the company;
(b) that anyone (including investors and creditors) can rely on the audit, not only in a
general sense but also very specifically by being able to sue the auditors if they are
negligent.
In deciding the case, the House of Lords studied with great care the complex issues involved
in balancing the interests of the parties involved and the public interest in having a fair,
viable and affordable system. The size of auditor’s potential liabilities, the difficulties in
defining wider liability in any fair yet practicable way, and the likely difficulties in
establishing whether third-party losses were in fact due to reliance on the accounts were
among the principle concerns underlying the conclusions reached by the House of Lords.
Bearing in mind the wide range of users of accounts, the Committee is unablke to see how
the House of Lords could have broadened the boundaries of the auditor’s legal duty of care
without giving rise ‘to a liability in an indeterminate amount for an indeterminate time to
an indeterminate class’.”
Nonetheless, Suzanie Chau in her article, while celebrating the decision of the law
Lords has validly criticized the judgment in the following words:
9
http://www.worldbank.org/html/fpd/privatesector/cg/docs/cadbury.pdf. visited on 15th May, 2002. This report is
popularly known as the ‘Cadbury Report’.
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“It is submitted that this limitation of duty to shareholders as a single body can produce
anomalous results in purely economic terms. Contrast the founder share-holder who holds
on to shares and paid little or no regard to the financial management of the enterprise with
the shareholder who buys shares as a price inflated as a result of audit negligence and who
sells the shares after its discovery and the subsequent drop in share price but before any
action is instituted. If it was subsequently decided that the auditors were negligent and that
the company should be compensated, would that founder shareholder not be enriched by
the company’s successful suit against the auditor at the expense of the (remediless)
shareholder who sold? It can hardly be argued that the founder shareholder relied on the
audit report and it is difficult to see what economic loss the auditor’s negligence has caused
him. What about shareholders who purchased shares prior to the publication of the audit
report but who are now members of the company and therefore part of the body of the
shareholders which is successful in its action against the auditor? Is their enrichment not
coincidental and hence, possibly unjust?”10
Suzanie Chua, “The Auditor’s Liability in Negligence in Respect of the Audit Report”, Journal of Business Laws,
1995 at 1.
10
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4.0. Caparo in Context: Importance of the Judgment
4.1. Legal Pronouncements before Caparo
Prior to 1964, it was quite onerous for a third party user of financial statements to sue
an accountant in the United Kingdom for negligent misstatements. 11 This was essentially
because of the prevailing view that there is no liability for negligent misrepresentation made
by one person to another who had relied upon it to his detriment, in the absence of any
contractual or fiduciary relationship between the parties or fraud.12
An example of this can be found in the case of Candler v. Crane, Christmas & Co.,13
wherein the court applied the “privity doctrine”.14 However, disagreeing with the majority
Lord Justice Denning wrote a strong dissenting opinion, which later gained widespread
approval.15
In fact, in Hedley Byrne & Co. v. Heller & Partners Ltd.16 the House of Lords adopted
Lord Denning's argument in establishing that a third party who had relied to his detriment on a
negligent misstatement could sue despite the absence of privity of contract.17
In that case, Heller & Partners Ltd., a merchant banking firm, provided incorrect data in
response to a request from National Provincial Bank for credit information on Easipower Ltd.
John G. Fleming, “The Negligent Auditor and Shareholders”, L.Q. Rev. July 1990 at 349.
In Candler v. Crane, Christmas & Co., [1951] 1 All ER 426, a majority of the Court of appeal dismissed the claim
of the plaintiff who had invested money a company, in reliance upon the accounts prepared by the accountants and
consequently lost his investment.
13
[1951] 1 All ER 426.
14
The essence of the privity doctrine is that a third party not in privity or in contract with the auditor cannot recover
damages for negligence.
15
In his dissenting judgment Lord Denning suggested three conditions for the creation of a duty of care in tort for
professionals. First, the advice must be given by one whose profession it is to give advice upon which others rely in
the ordinary course of business. Second, it must be known to the adviser that the advice would be communicated to
the plaintiff in order to induce him to adopt a particular course of action. Third, the advice must be relied upon for
the purpose of the particular transaction for which it was known to the advisers that the advice was required.
However, Lord Denning did not consider these conditions as necessarily exhaustive criteria for the existence of a
duty.
16
[1963] 1 All ER 575.
17
Hedley Byrne has been acknowledged as the first significant inroad into the general denial of the ability of nonclients to sue accountants for negligent misstatements.
11
12
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Heller & Partners knew the credit information would be communicated to a specific unidentified
customer of National Provincial Bank. In reliance on the credit information, Hedley Byrne, the
unidentified customer, extended credit for services rendered to Easipower Ltd. Easipower then
went into liquidation.
The House of Lords ruled that accountants and other professionals owed a duty to any
third person with whom a "special relationship" existed. It opined that a "special relationship"
arose in Hedley Byrne because of a "voluntary assumption of responsibility" by the
defendant to the plaintiff. The law Lords agreed that a "special relationship" includes more than
a fiduciary or contractual relationship; however, they failed to specify criteria for deciding when a
"special relationship" arises, and thus, when a duty of care comes into existence.
The clear trend in the law of negligent misstatement immediately after Hedley Byrne was
toward expanding the scope of duty to more third parties.18 In general, the basis of the scope of
duty or "special relationship" moved from "voluntary assumption" of responsibility by the
defendant to the third party's "reasonable reliance" to "foreseeability."19
The application of the foreseeability concept gained currency in Anns v. London
Borough20. Although the facts of Anns do not deal with accountants, the case established a twoprong test of liability for negligent misstatements.
“The first prong asks whether the defendant's carelessness may be likely to injure the
suing party:
First, one has to ask whether, as between the alleged wrongdoer and the person who has
suffered damage there is a sufficient relationship of proximity or neighbourhood such that,
in the reasonable contemplation of the former, carelessness on his part may be likely to
cause damage to the latter-in which case a prima facie duty of care arises.
If the first question is answered affirmatively, a duty of care arises.
The second prong examines any considerations that could reduce or eliminate the scope
of the duty owed: "[I]t is necessary to consider whether there are any considerations which
K.R. Chandratre, “Auditors duty of care and liability for negligence: Recent Judicial Exposition”, [2002] 35 SCL
(Mag.) at 109.
19
Id.
20
[1977] 2 All ER 492.
18
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ought to negative, or to reduce or limit the scope of the duty or the class of persons to whom
it is owed or the damages to which a breach of it may give rise."”21
The practical effect of the decision in the case of Anns was to render almost any
sequence of events foreseeable, leaving any limitation on liability to the vagaries of ad hoc
policy assessments freed from precedential constraints.22
In the context of accountants' liability to non-clients for negligence, the Anns
foreseeability test was applied in JEB Fasteners Ltd. v. Marks Bloom & Co.23 In that case, JEB
Fasteners acquired all the shares in a private company having relied on an unqualified audit
report produced by accountants Marks Bloom. The financial statements contained numerous
errors and thus, the stock acquired by JEB was overvalued. Although the auditors were
unaware of any specific takeover bidder at the date of the audit, they later became fully aware of
the identity and progress of the bidder and were in touch with him and supplied relevant
information. JEB Fasteners sued the auditors for damages claiming the provision of negligent
auditing services. The Queen's Bench Division ruled that the appropriate test for establishing a
duty of care is whether the auditors knew or reasonably should have known that a person might
rely on the audited financial statements for making a decision.
The Anns foreseeability test was also followed in the Outer House of Session in
Scotland in Twomax Ltd. v. Dickson, McFarlane & Robinson24. In that case the court dealt with
three separate legal claims from investors who had bought shares in a closely held company.
The firm went into bankruptcy shortly after the investors acquired their shares. As in JEB
Fasteners, the defendant accountants were found to owe a duty of care to the plaintiff investors.
The fact that the accountants knew or should have known that the potential investors might rely
on the audited financial statements was deemed sufficient to create proximity, thus giving rise to
a duty of care.
Carl Pacini et al., “At The Interface Of Law And Accounting: An Examination Of A Trend Toward A Reduction
In The Scope Of Auditor Liability To Third Parties In The Common Law Countries”, 37 Am. Bus. L.J. at 171.
22
Id.
23
[1983] 1 All ER 583.
24
1984 SLT 424 as cited in Carl Pacini et al., “At The Interface Of Law And Accounting: An Examination Of A
Trend Toward A Reduction In The Scope Of Auditor Liability To Third Parties In The Common Law Countries”, 37
Am. Bus. L.J. at 184.
21
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4.2. Caparo and After
The widening ambit of accountant liability to third parties was arrested in Caparo
Industries Plc v. Dickman.25 As has been already detailed, in a unanimous decision, the House
of Lords ruled that an auditor of a public company, in the absence of special circumstances,
owes no duty of care to an outside investor or an existing shareholder who buys stock in
reliance on a statutory audit.
In the process, the court fashioned a three-prong test for an
auditor's duty of care, which has been explained earlier.
Since Caparo, the courts have continued to limit the imposition on auditors of a duty to
non-clients for negligent misstatements. A case in point is James McNaughton Papers Group
Ltd. v. Hicks Anderson & Co.26. The facts involved the plaintiff's takeover of its rival, MK, which
had been in financial distress. MK's accountants prepared draft financial statements, which
were shown to the plaintiff. Reversing the trial court judge, the English Court of Appeal found
that the accountants owed no duty of care to the plaintiff. In doing so, the court cited Caparo
and noted that in England, a "restrictive approach is now adopted to any extension of the scope
of the duty of care beyond the person directly intended by the maker of the statement to act on
it." In the case in question, Lord Justice Neill's opined that the important factors to consider in
addressing the scope of duty question are the purpose for which the information was prepared
and communicated, the relationship between the accountant, client, and third party, the size of
the class to which the third party belongs, and the extent of the third party's reliance.
One of the most significant post-Caparo decisions is Morgan Crucible Co. Plc v. Hill
Samuel Bank Ltd. 27 . In this case, the plaintiff sued a target firm's auditors and investment
bankers. First Castle Electronics, the takeover target, and its investment bankers released a
circular stating that an initial hostile takeover bid was too low because it did not place sufficient
value on a projected profit rise. First Castle's accountants had issued a letter, contained in the
circular, stating that the forecast had been prepared in accordance with First Castle's
accounting policies. The acquiring firm raised its offer price (the "second takeover bid") but later
claimed the profit forecast was negligently prepared. The English Court of Appeal ruled, as in
Caparo, that the accountants did not owe a duty of care to the plaintiff before the first takeover
25
[1990] 1 All ER 568.
(1991) 2 QB 113.
27
[1991] 1 All ER 148.
26
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bid. Significantly, in Caparo, all the accountant's representations relied on by the plaintiff had
been made before an identified bidder had emerged. Although the English Court of Appeal did
not decide that a duty of care arose with regard to the second takeover bid, it indicated such a
claim was not bound to fail. The reasons were that it was foreseeable the plaintiff would suffer a
loss if the profit forecast was inaccurate, the defendant accountants knew the identity of the
plaintiff and intended the plaintiff to rely, and much of the information in the profit forecast was
available only to the defendant.
4.3 Importance of the Judgment
The decision of the House of Lords in Caparo narrowed the scope of accountant liability
to third parties for negligent misstatements. It has now been established that the auditor of a
public firm, absent special circumstances, does not owe a duty of care to an outside investor or
an existing shareholder who buys stock in reliance on audited financial statements. As a result
of Caparo accountant liability for negligent misstatements has now come to be confined to
cases where it can be established that the accountant knew his work product would be
communicated to a non-client, either individually or as a member of a limited class, and the third
party would rely on the work product in connection with a particular transaction.
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5.0. Auditor’s Liability for Negligence
The complex question of the liability of the auditor to various groups of people, especially
third parties, cannot be isolated from the position, role and the responsibilities, which the auditor
has been assigned by the law and judiciary.
5.1. The Auditor under the Framework of Company Law
5.1.1. Auditor vis-à-vis Shareholders
The Calcutta High Court in the case of Deputy Secretary v. S.N. Das Gupta28,
while elucidating on the relationship between the auditors and the shareholders has
stated that:
“A joint stock company carries on business with capital furnished by persons who buy
its shares. The owners of the capital are, however, not in direct control of its application,
which is left to the executive of the company. In those circumstances, some arrangement
is obviously called for by which those who provide the capital know periodically what is
being done with their money, how the affairs of the company stand and what the
present value of their investment is. The Companies Act, therefore, provides for the
employment of an auditor who is the servant of the shareholder and whose duty is to
examine the affairs of the company on their behalf at the end of a year and to report to
them what he has found. That examination by an independent agency such as the
auditors is practically the only safeguard which the shareholders have against the
enterprise being carried on in an unbusiness like way or their money being misapplied
or misappropriated without their knowing anything about it. The Act provides the
safeguard in two forms. It makes the duty of the auditor to give an expression of opinion
on certain specified matters of a vital character and it makes him liable, along with the
directors, for misfeasance, if he fails to perform his duties as required by law and the
approved audit procedure.”
Thus, auditors have a fiduciary relationship vis-a-vis the shareholders as a body
and ‘the auditor is like a trustee for shareholders.” 29
5.1.2. Auditor as an Officer of the Company
The auditor is an officer of the company only for limited purposes as given in Section
2 (30) of the Companies Act, 1956 30 and therefore can not be prosecuted for
28
(1955) 25 Com Cas 413.
Institute of Chartered Accountants v. P.K. Mukherjee, AIR 1968 SC 1104.
30
Section 2(30) states that the auditor is an officer of the Company as far as winding up is concerned and
gives a list of provisions under which the auditor is considered to be an officer of the company. These
29
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contravention of the provisions of the Company Act, 1956 reagarding the maintenance of
the books of account, preparation of financial statements and their audit.
5.1.3. Auditor as a Watchdog
In Re Kingston Cotton Mills31 case the Court held that while it is true that the
auditors primary function is to look into the account books of the company, it is also the
law of the land that where there is adequate material before the auditor to arouse
suspicion, he should probe into the matter in detail and attempt to get under the skin of
the problem and thus help resolve the issue.32
The Court stated in the above mentioned case that:
“an auditor is not bound to be a detective or … to approach his work with suspicion.
He is a watchdog and not a bloodhound. He is justified in believing the tried servants of
the company in whom confidence is placed by the company. He is entitled to assume
that they are honest and rely on their representations, provided he takes reasonable
care. If there is anything calculated to excite suspicion, he should probe it to the bottom,
but in the absence of anything of that kind he is only bound to be reasonably cautious
and careful. His duty is verification and not detection. If in the course of his sniffing
around he detects something suspicious he must track it down to verify it.”
5.1.4. Duties of Auditors in Carrying Out Audit

Duty Of Care
In the case of In Re London and General Bank,
33
the Court held:
The duty of the auditor “is to ascertain and state the true financial position of the
company at the time of the audit, and his duty is confined to that. He discharges his duty
by examining the books the company. But he does not discharge his duty by doing this
without inquiry and without taking any trouble to see that the books themselves show the
company’s true position.”
Thus, in exercise of his duty, an auditor must use reasonable care and skill, and
must certify to the shareholders only what he believes to be true. Essentially, an auditor
should give a true and fair view of the company’s annual financial statement.
provisions are section 477, section 478, section 539, section 543, section 545, section 625, and section 633.
31
[1896] 2 Ch. 279.
32
Institute of Chartered Accountants v. P.K. Mukherjee, AIR 1968 SC 1104.
33
[1895-96] All ER Rep 953.
23
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
Standard of Care
No legislation or the normal contract of engagement specifies the standard of
care required of an auditor.34 However, various courts have laid down that the auditor
must exercise reasonable skill and care in the discharge of his duties.
This has been best described in the following words of Romer J. in City
Equitable Fire Ins. Co., Re:35
“He must be honest, that is, he must not certify what he does not believe to be true
and he must take reasonable care and skill before he believes that what he certifies is true.
What is reasonable care in any particular case must depend upon the circumstances of that
case. Where there is nothing to excite suspicion very little inquiry will be reasonably
sufficient. Where suspicion is aroused more care is obviously necessary; but, still an auditor
is not bound to exercise more than reasonable care and skill even in case of suspicion and he
is perfectly justified in acting on the opinion of an expert where special knowledge is
required.”
5.2. Auditor’s Liability
5.2.1. General
The auditor holds himself out to the public as an expert, willing to perform skilled
services for reward. Accordingly, the law imposes exacting obligations on him to carry
out the work to an acceptable standard of competence and with due care.
5.2.2. Basis of General Liability
There may be instances where the auditor is negligent in performing the duties
and obligations imposed upon him by law. Such negligence on the part of the auditor in
performing his duty in that capacity may give rise to a liability, either in tort or in contract.
If it is proved that the auditor had failed to perform his work with due care and skill, he
can be held personally liable in damages to the extent of the loss suffered as a result of
his default by the client or other person relying on him to whom he may owe a duty of
care.36
While the liability of the auditor for his negligent acts or misstatements in contract is
based on a breach of contract with the client, the general liability of an auditor, or for
34
S.M. Shah, Lectures on Company Law (19th Ed., Bombay: N.M. Tripathi Pvt. Ltd., 1990) at 382.
[1924] All ER Rep 485.
36
Jon H. Holyoak, “Accountancy and Negligence”, Journal of Business Laws, 1986 at 121.
35
24
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that matter, of a member of any other skilled and learned profession in Tort is based on
the principle of holding out. In fact, in Cooley on Torts, it has been stated that:
“In all those employments where peculiar skill is requisite, if one offers his services, he
is understood as holding himself out to the public as possessing the degree of skill
commonly possessed by others in the same employment, and if his pretensions are
unfounded, he commits a species of fraud upon every man who employ him in reliance
on his public profession.”37
5.2.3. Auditor’s Liability to the Company
Auditors are appointed by the company and though the auditors might be making
their reports to the members of the company, they owe a contractual duty of care to the
company itself. Thus, a negligent audit on the part of the auditors may give rise to the
auditor’s liability to the company for the loss arising from his negligence.
However, an auditor’s liability to the company may also arise in tort. To hold the
Auditors liable for negligence at common law it is necessary for the company to show
that loss has been caused to the company through the failure of the Auditors to perform
their duty with reasonable care and skill.38
Thus, in pursuance to these principles in London Oil Storage Co. v. Seear
Hasluck & Co.39 the auditor was held liable and ordered to compensate the company for
the losses suffered by the company on account of the auditor’s failure to verify one of the
assets in the balance sheet.
5.2.4. Auditor’s Liability to the Shareholders
It was acknowledged by the House of Lords in the case of Caparo Industries plc
v. Dickman and others,40 that the Companies Act established a relationship between the
auditors and the shareholders of a company upon which the shareholders are entitled to
protection of their interest.
37
As quoted in A. Ramaiya, Guide to Companies Act (Part II, 15th Ed., Nagpur: Wadhwa and Company, 2001) at
708.
38
A. Ramaiya, Guide to Companies Act (Part II, 15th Ed., Nagpur: Wadhwa and Company, 2001) at 710.
39
(1904) 30 Acct. L.R 93 Palmer's Company Law (Clive M. Schmitthoff Ed., 24th Ed., London: Stevens & Sons
Limited, 1987) at 1091.
40
[1990] 1 All ER 568.
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Often, the interest of the shareholders in the proper management of the
company’s affairs is indistinguishable from the interest of the company itself, that is, the
shareholders as a body.41 Thus, it has been held that the auditor’s client is the body of
shareholders, that is, the company, and it is to the company that the auditors will be
recognized, in law, to owe a duty of care and the auditors owe no duty of care to an
individual shareholder in the company.
5.2.5. Auditor’s Liability to Third parties
There was formerly the prevailing view that there is no liability for negligent
misrepresentation made by one person to another who had relied upon it to his
detriment, in the absence of any contractual or fiduciary relationship between the
parties. 42 This position was however, overruled in Hedley Byrne & Co. v. Heller &
Partners43 where it was held that in certain circumstances contractual liability could be
incurred for a negligent misstatement made by one person to another, even in the
absence of any contractual or fiduciary relationship. Later, in Caparo Industries plc v.
Dickman and others, 44 the scope of accountant liability to third parties for negligent
misstatements was narrowed.45
Thus, the auditor of a public firm, absent special circumstances, does not owe a
duty of care to an outside investor or an existing shareholder who buys stock in reliance
on audited financial statements. Accountant liability for negligent misstatements is
confined to cases where it can be established that the accountant knew his work product
would be communicated to a nonclient, either individually or as a member of a limited
class, and the third party would rely on the work product in connection with a particular
transaction.
Suzanie Chua, “The Auditor’s Liability in Negligence in Respect of the Audit Report”, Journal of Business Laws,
1995 at 16.
42
In Candler v. Crane, Christmas & Co., [1951] 1 All ER 526, a ajority of the Court of appeal dismissed
the claim of the plaintiff who had invested money a company, in reliance upon the accounts prepared by the
accountants and consequently lost his investment.
43
[1963] 2 All ER 575.
44
[1990] 1 All ER 568.
45
For a detailed discussion refer to Section 4.0. of this project-report.
41
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6.0. Conclusion
In a marked departure from the "dark ages" of liability for auditors, there has been a
growing trend toward a narrower scope of accountant liability for negligence. This is a significant
development given that only about a decade ago, there had been an identifiable trend toward
expanding the auditor's liability for negligent misstatements.
The trend towards expanding the auditor's liability to third parties, which emerged during
the 1970s and 1980s, moved the scope of duty away from blind adherence to a privity or nearprivity standard to a version of the reasonable foreseeability rule. This expansion of
accountant liability to third parties was part of a “larger movement in tort law toward encouraging
risk creators to employ optimal levels of care or allocating accident costs to parties better able to
bear the losses.”46 The independent audit was no longer seen as the creature of a contract, but
rather as a product which, like any other product, foreseeably might harm third parties if it was
defectively produced.
In the various judicial pronouncements in this trend the Courts had predicted numerous
benefits from the expansion of accountant liability to third parties. It was opined by the Courts
that :

By imposing liability on the one responsible for the loss, the foreseeability rule
would cause accountants to perform more thorough audits.

A more expansive liability rule would compensate the innocent third party who had
relied on a defective audit.

The expansion of liability was consistent with the moral blame attached to auditor
misconduct.

Liability expansion would promote efficient loss-spreading.
The predicted benefits, however, failed to materialize. It was observed that “accountants
generally have not responded to greater liability exposure by more thorough auditing but by
Carl Pacini et al., “At The Interface Of Law And Accounting: An Examination Of A Trend Toward A Reduction
In The Scope Of Auditor Liability To Third Parties In The Common Law Countries”, 37 Am. Bus. L.J. 171.
46
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withdrawing audit services from high risk firms”.47 Thus, realizing the futility of this approach,
many courts went on to circumscribe accountant liability to third parties. The Caparo decision
has been one of the most significant in this regard and it has narrowed the scope of accountant
liability to third parties for negligent misstatements. Through the instrumentality of Caparo
accountant liability for negligent misstatements is now confined to cases where it can be
established that the accountant knew his work product would be communicated to a non-client,
either individually or as a member of a limited class, and the third party would rely on the work
product in connection with a particular transaction.
Sadly, with the collapse of Enron and the role of Arthur Anderson in this regard, there
has been a calmour for a movement back in the direction of expansive liability of the auditors.
Auditors are being sought to be made responsible to investors, creditors and others who deal
with the company accounts. However, such demands are based on the misconception about the
functions of the auditors. In fact there has now come into existence a wide expectation gap
between what the public perceives of and expects from the auditors and the audit report and
what auditors are professionally responsible for.
It is submitted that the decision of the law Lords in Caparo was a step in the right
direction and any movement in the opposite direction would give rise to what Cardozo referred
to as liability "in an indeterminate amount for an indeterminate time to an indeterminate class".
47
Id.
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7.0. Bibliography
7.1. Articles
1. Ankit Majumdar, “Auditor’s Duty to Care”, [1998] 18 SCL (Mag.) 134.
2. Carl Pacini et al., “At The Interface Of Law And Accounting: An Examination Of A Trend
Toward A Reduction In The Scope Of Auditor Liability To Third Parties In The Common
Law Countries”, 37 Am. Bus. L.J. 171.
3. John G. Fleming, “The Negligent Auditor and Shareholders”, L.Q. Rev. July 1990.
4. Jon H. Holyoak, “Accountancy and Negligence”, Journal of Business Laws, 1986.
5. K. Srinivasan, “Corporate Governance- Audit as a key factor”, [2001] CLA (Mag.) 25.
6. K.R. Chandratre, “Auditors duty of care and liability for negligence: Recent Judicial
Exposition”, [2002] 35 SCL (Mag.) 109.
7. P. Bhaskar Naryana, “Companies Bill, 1999: Audit and Auditors”, [2000] 26 SCL (Mag.)
47.
8. Suzanie Chua, “The Auditor’s Liability in Negligence in Respect of the Audit Report”,
Journal of Business Laws, 1995.
9. Travis Morgan Dodd, “Accounting Malpractice and Contributory Negligence: Justifying
Disparate Treatment Based Upon the Auditor’s Unique Role”, 80 Geo. L.J. 909.
7.2. Books
1. A. Ramaiya, Guide to Companies Act (Part II, 15th Ed., Nagpur: Wadhwa and Company,
2001).
2. A.M. Chakraboti, Taxmann’s Company Law (Vol. 1, New Delhi: Taxmann Allied
Services, 1994).
3. Boyle and Birds Company Law (John Birds et. al. Eds., 3rd Ed., New Delhi: Universal
Law Publications, 1997).
4. Gower’s Principles of Modern Company Law (Paul Davies Ed., 16th Ed., London: Sweet
and Maxwell Limited, 1997).
5. Palmer's Company Law (Clive M. Schmitthoff Ed., 24th Ed., London: Stevens & Sons
Limited, 1987).
6. S.M. Shah, Lectures on Company Law (19th Ed., Bombay: N.M. Tripathi Pvt. Ltd., 1990).
7.3. Reports
1. Cadbury Commission, Report of the Committee on the Financial Aspects of Corporate
Governance (December 1992).
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7.4. Websites
1. http://www.geocities.com/orie0639/lecturenotes/hoyanoeconomicloss.htm visited on 15th
May, 2002.
2. http://www.worldbank.org/html/fpd/privatesector/cg/docs/cadbury.pdf visited on 15th
May, 2002.