Thoroughbred Breeders' Association v Price Waterhouse 2001 (4) SA 551 (SCA)

Thoroughbred Breeders' Association v Price Waterhouse 2001 (4) SA 551 (SCA)

Facts:

In the case of Thoroughbred Breeders' Association v Price Waterhouse 2001 (4) SA 551 (SCA), the Thoroughbred Breeders' Association (TBA) alleged negligence against Price Waterhouse (PW), a firm of auditors, for failing to detect irregularities in the accounts of the Germiston Betting Society (GBS). The key facts involve the alleged negligence in the audit process, leading to financial losses suffered by TBA.

Issue: The primary legal issue was whether Price Waterhouse was negligent in conducting the audit of GBS, and if so, whether this negligence resulted in financial harm to the Thoroughbred Breeders' Association.

Rule: The legal rule established is that auditors owe a duty of care to their clients, and negligence in the audit process that leads to financial loss may give rise to a claim for damages.

Analysis: The court analyzed the audit procedures conducted by Price Waterhouse, the irregularities in the GBS accounts, and whether Price Waterhouse breached its duty of care. The focus was on determining whether the auditors' actions fell below the standard expected of a reasonably competent auditor.

Conclusion: The court found in favor of the Thoroughbred Breeders' Association, holding that Price Waterhouse was negligent in the audit process, and this negligence resulted in financial harm to TBA. Damages were awarded to TBA for the losses suffered.

Influence on South African Auditing and Negligence Law: Thoroughbred Breeders' Association v Price Waterhouse has had a significant influence on South African auditing and negligence law by reinforcing the duty of care owed by auditors to their clients. The case establishes a precedent that auditors can be held liable for negligence in the audit process, especially when such negligence leads to financial harm for the client. This decision contributes to the development of a legal framework that emphasizes accountability and responsibility in the auditing profession.