Tickitt & Run, the auditors to Daffodil Ltd, gave an unqualified report on 14 December 20-7 on the accounts for the year ending 30 June 20-7. These accounts were seen by The Wednesfield Bank PLC in September 20-8 and the bank lent £250 000 to Daffodil on short-term overdraft on 19 September 20-8. In March 20-9 the company went into liquidation still owing the bank £200 000. The company was hopelessly insolvent and the bank recovered nothing. It turned out that the accounts of June 20-7 were defective in that several substantial creditors were omitted from the accounts.

Had these creditors been included it would have been apparent that Daffodil was not a going concern in June 20-7.

Discussion Question

1. Can the bank recover from Tickitt & Run?