AN ACCOUNTANT’S THEFTS

Otago Witness, Issue 3862, 20 March 1928, Page 38

AN ACCOUNTANT’S THEFTS

CLAIM AGAINST AUDITOR.

CHRISTCHURCH, March 13. An unusual case was heard in the Supreme Court to-day by Mr Justice Adams. Tho lodd Motor Company, following thefts from it by an accountant, sued Arthur L. Gray for £694 19s 6d, alleging that no was the company’s auditor and was negligent in not discovering the thefts. The statement of claim set out that between October 10, 1925, and March 23, 1927, the company ha J been robbed of sums of money totalling £1036 9s 3d by an accountant named Aitchison employed by the company in Christchurch. During the whole of that time Gray was the company’s auditor. He was negligent it was alleged, in failing to exercise ordinary skill and care and to discover the thefts.i He should have discovered them at the latest by May 19, 1926, when they amounted to not more than £341 13s 9d. Aitchison had been sentenced to imprisonment for the thefts and had no means. The company had suffered loss an inconvenience and in particular the loss of £294 15s 6d, tho total stolen after March 31, 1926.* The com pany claimed that sum as special damages. Mr Spratt (Wellington) appeared for the company and Mr Donnelly, with him Mr Archer, for Gray. Mr Spratt said that Gray audited the company’s books in Christchurch and Wellington. An audit was made every halfyear. The defence at first was a general denial of allegations in the statement of claim, but an amended defence was that Gray was not the auditor and was not negligent. Gray, the company alleged, was auditor for the period ended March 31, 1926. In regard to that period the company’s only duty was to prove Gray’s negligence. As auditor, he should have warned the company, in which case tho later defalcations would have been avoided. Mr Spratt explained that most of the company’s business was worked on the hirepurchase system, taking promissory notes for cars. Gray’s duties included verifica tion of tho “bills receivable” account; but in September, 1926. the company had to complain of non-verification. The manager of the company subsequently had asked Gray to be careful about scrutinising accounts, as he suspected Aitchison on a minor matter. The main points of com plaint were that schedules of bills receivable had not been checked, and the reconciliation statement had not been checked. This had happened in two audits. The accountant had made use of £7BO worth of bills receivable showing them as still in circulation, while they were actuallypaid off. Gray had accepted the accountant’s statement, neglecting his duty as an auditor fo check tire assets. Lengthy evidence was heard, and the case was adjourned till to-morrow.

CASE FOR THE DEFENCE. CHRISTCHURCH, March 15.

Evidence for the defence was heard by Mr Justice Adams to-day in the action in which the Todd Motor Company claimed from Arthur L. Gray, accountant, damages amounting to £694 19s 6d, alleging that Gray was negligent In not detecting defalcations by Walter Aitcheson, an accountant employed by the company. Mr A. T. Donnelly said chat the case resolved itself into three questions—namely, Was Gray negligent as an auditor in March, 1926? If he were, what damages could be claimed from that negligence? Was Gray auditor til) September, 1926, and was he then negligent, and if so what were the damages? It ,vas a rare type of case, said Mr Donnelly, and it had\one feature which distinguished it sharply from any similar claim of which there was any record—namely, it was a ,elaim by a trading --oncern against a person who was admittedly during that period under argument a servant on salary and commission, and the -fact that the plaintiff concern sought to fasten on to the defendant the respon sibility and duty of a man with an independent professional status at the same time that he was a servant of rhe company. The position was an anomalous one, and no one, he argued, could point to an •_ independent professional man occupying the position that Gray was said to hold. The relationship which was contended against him was one that nc professional auditor of his standing in the Dominion would have undertaken. His Honor reserved his decision.