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Homework answers / question archive / Accountancy firm Fairhurst & Co
Accountancy firm Fairhurst & Co. signed off the audit of the accounts of Happy Day Holiday Group Ltd, a group of travel agents, whose accounts showed sound financial health. Within months of this Happy Day Holiday Group Ltd had collapsed.
Legal proceedings have begun and Franco’s Bank has sued Fairhurst & Co. for negligence because they say that Fairhurst & Co should have identified the severity of Covid-19 on Happy Day Holiday Group Limited.
The claim of negligence was based on the fact that Fairhurst & Co had failed to discover fraudulent overstatements of the group’s true financial position.
Fairhurst & Co had included a clear note within their audit report that “it is management’s responsibility to address the going concern of Happy Day Holiday Group, and they held no responsibility to anyone else for their audit work”.
