Hot off the press: the Court of Appeal has ruled in favour of Ernst & Young, in the long running MAN v Freightliner & Ernst & Young litigation. In making this decision, the Court of Appeal upheld an earlier decision from the High Court.
The judgment could have wider implications for auditors generally. The Court of Appeal commented that an auditor of the accounts of a subsidiary company could owe a special audit duty of care to the parent company, in circumstances where it knew that the parent company would rely on its audit report for the purposes of negotiating an agreement for the sale of the subsidiary to a third party. In these circumstances, an auditor could owe a special audit duty to protect the parent company from the consequences of representations and warranties made in the sale agreement. Whilst this factual matrix was not applicable in this case, audit firms could fall foul of the ruling in subsequent cases.