Q.The well-known principle that 'an auditor is a watchdog, but not a bloodhound' — laid down in Re Kingston Cotton Mill Co. (No. 2), 1896 — means that an auditor:

The watchdog/bloodhound principle sets a middle-ground standard: reasonable, diligent care is required, but not a suspicious, detective-style probe of every single transaction without cause. …

Why (c) is correct: Lord Justice Lopes's principle deliberately sets a middle standard between two extremes. A "watchdog" is alert, diligent, and will raise the alarm when something genuinely looks wrong — this is the level of reasonable care and professional scepticism an auditor must bring to every audit. A "bloodhound," by contrast, relentlessly hunts down every possible trace of wrongdoing regardless of whether there is any actual reason for suspicion — the principle explicitly says an auditor is NOT required to work at this level, absent genuine cause.

Why the distractors are wrong: …

A frequent misreading is to treat "not a bloodhound" as meaning auditors bear no responsibility for fraud at all. The principle is a balance, not an exemption — reasonable, diligent, sceptical checking IS required; only an exhaustive, suspi …