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Problem 7: Client invested £30,000 in a business on the strength of an accountant's letter showing company was making in excess of 40% gross profit; the letter included the following paragraph "We take this opportunity to remind you that any such reference is given on the understanding that, in accordance with normal commercial practise, although this reference is given in good faith, no financial responsibility can be accepted for the opinion expressed". The company went into liquidation within a year of the investment.

Advice: On examining the documents, it was noted that the same accountants had completed the audit of the companies' accounts within days BEFORE writing their letter and those accounts clearly revealed gross profit of only 17%. Client obtained legal aid to commence litigation against accountants for professional negligence and the accountants agreed an out of court settlement.

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