IMPULSE PTY LTD

Impulse Pty Ltd

Impulse Pty Ltd- finance law case

Introduction

Companies prepare audit report so that they can provide a clear picture to the management of the company and to the investors. It comprises of substantial information regarding their process and operation. Hence, in order words, a fair statement of the company financial statement on which external stake holder relies.

Moreover, unqualified report is complete audit report which has been executed and investigated so carefully and thoroughly that only partial information or discrepancies remain from the eye of the auditors. Both the internal systems of control along with the details in the organization's books are analyzed by the unqualified audit. All supplementary documentation and supporting records are used in an unqualified audit. Lacking of this can be very dangerous for the company in terms of money as well as in terms of management. Qualified audit report are those in which auditors give a statement against the company and fundamental disagreement with the company to such an extent that the auditor considers the accounts misleading.

Case Scenario

Impulse is an entertainment system manufacturing company that came into existence in 2005. The audit of the company was under King & Queen since it existence. Impulse was suffering from liquidity problem due to the fall in debtors' turnover and inventory turnover and King & Queen did not gave any consideration to the valuation of these assets. During 2012, they obtain loan from finance company Easy Finance for the purpose of additional working capital which was approved on the basis of the unqualified audit report. Hence, this additional working capital did not improve their productivity and experiencing severe trading problems and hence termed as insolvency in 2012 December.

Furthermore, EFL lawyer notified King & Queen regarding the audit they did for Impulse on the audit of the 30 June 2012 financial report. The claim of EFL on the King & Queen was the inadequate provision for doubtful debts and a fall in the value of inventories on hand, and that these problems were evident at 30 June 2012, but had not been adequately dealt with in the financial report due to King & Queen negligence. Furthermore, they also claimed that they would have not given loan to impulse if 2012 financial report had been qualified.

Law of Negligence

Law of negligence in simple term is the failure to use ordinary care respect to company or person either with action or with omission. The law of negligence take place when a person does not reasonably care for that would be used by other persons under certain circumstances. And people perform certain action that would not be performed by another person who had been careful to harm other person through any action.

General Condition of Law Of Negligence

People can suffer damage through many circumstances. This damage may not always be substituted for any damage to four general requirements to be met.:

Damage has occurred: There must be a material loss (property damage), a non-material damage (such as a libel, ...