ICAEW has updated its guidance on positioning of the Bannerman paragraph. Sophie Campkin and Phil Lenton explain the details.
ICAEW makes guidance available on managing the risk of liability to third parties in various helpsheets and technical releases.
This article focuses on technical release TECH 01/03AAF (Revised) The audit report and auditors’ duty of care to third parties, which was updated recently. Auditors have been aware of the risk of taking on responsibilities to third parties with regard to their audit reports for a number of years. Sometimes, a duty of care to a third party might be assumed inadvertently as a result of action or inaction by the auditors.
The Royal Bank of Scotland v Bannerman Johnstone Maclay case in 2002 highlighted the potential exposure of auditors, when case of Barclays Bank plc v Grant Thornton UK LLP, which also provided helpful guidance, as well as a number of changes to audit reports,
ICAEW has again taken the advice of leading counsel and issued 01/03AAF (Revised). The key change to 01/03AAF is the positioning of the Bannerman paragraph as the Linal section of the audit report, directly preceding the auditor’s signature, with the subheading Use of our report. The wording of the Bannerman paragraph is itself mainly unchanged with the exception of some updating of references.
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