SPACE Wira Bhd was recently declared bankrupt as the company was unable to pay its mortgage loan totalling RM5 million. It was discovered by the liquidators of the company that the assets had been overstated by RM800,000 as a result of fictitious non-current assets being recorded in the financial statements. The liquidators of SPACE Wira Bhd are now suing the auditor, Rahana & Co, for breach of contract and negligence. The auditors have not carried out adequate procedures to verify the non-current assets and had relied mainly on the management's non-current assets schedule. However, the auditors claimed that they are not liable for the loss because the loss was not caused by their negligence.
Required:
Discuss whether the auditors had been negligent in the audit of SPACE Wira Bhd, leading to the bankruptcy of the company or not. Support your answer with relevant elements and cite with relevant cases.