Bank Report of Audit Purposes.

[smraza]

Dear all,
I would like ask that, when the banker of a company sends bank report for audit purposes directly to its auditors, Can he write the following statement

"This certificate is being issued upon specific request of our customer without any risk, responsiblity, liability or guarantee onpart of the bank or any of its employees."

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SMR

[Masood]

Of course the bank can make the statement. Remember, the bank has not contractual obligations towards the auditors. They act only on behalf of and at the direction of their customer/clients.

[Goodman]

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1 Does all the banks use this statement?
2 Depends what are the discloures in the audit letter. I mean if bank say client has one bank account and later transpires that it had another one. Or bank failed to disclose the personal gurantees for the directors son mortgage and as such financail statements did not have all the disclosures and public was misled, I think the PI insurers of the auditors and the bank are up for a costly battle.
So basically, bank can write whatever they like but if they are negligent they are negligent. see the BJM VS Bank of Scotland its a landmark case in the modern auditing.

[Goodman]

sorry forgot to include the disclaimer.

above infomation is my understanding only and it doesnot have any value other thhan that. please make your own judgements.

[Masood]

Dear Goodman,

The question was whether the bank can make disclaimers. The decision you quote BJM v BoS was actually <i>against </i> the auditors and not against the Bank.

The basis of the action brought by Royal Bank of Scotland
Plc (the “Bank”) was that the Bank had lent “substantial
sums” to a company (the "Company”) of which the firm of
accountants, Bannerman Johnstone Maclay (“BJM”), had
been the auditors. When Receivers were subsequently
appointed for the Company and the Bank was unable to
recover much of the monies lent, the Bank argued that
BJM as auditors had owed a duty of care to the Bank, and
that the losses it had sustained had been attributable to
the breach of that duty (having relied, at least in part, on
the contents of the audited accounts when making the
commercial decision to advance the relevant loan(s)).

[Goodman]

Auditors make disclaimers to third party in the audit report by specifically mentioning that the audit report is for shareholders, still we get sued, so caparo's principle is now rewritten.

The point mentioning BJM case was
if auditors could be held negligent by court instead of a health warning that report is for shareholders only and no duty of care is owed to anybody else by anybody else why not the opposite could happen in case bank is negligent reporing to us.

All the bank reports have the disclaimer these days, but it doesnot have any value, I think. They can write whatever they feel like.

[smraza]

No zubair,
All banks are not writing these kind of statements, I have seen only one bank, and the interesting thing is that, i have got the confirmations of same bank from two different branches, one branch is writing that statement, but the other is not,
In my opinion, there is no impact on liability of the bank by writing such a general
statement, the bank charges an amount for providing such information to the auditors,
hence, the information is not volantary and if bank makes any misstatement
then it will be held liable, bcaz auditor may qualify his opinion on basis of information
provided by the bank.
I have seen many cases in which bank confirmed the qualification matters to the
auditors, (afterwards bank issued revised i.e. correct confirmations).


SMR

[Pracs]

Yeah all banks here put the disclaimer statement too, and do issue revised statements if an error is pointed out. I am not sure about the legal implications here.