Charlie McCreevy, European Commission internal markets commissioner, told the JURI parliamentary committee in Brussels yesterday he would formally recommend member states prepare to limit auditors' liability in the first quarter of 2008.

‘I do not intend to impose the means by which liability is limited. This will be for each member state to decide,’ he said. ‘Existing solutions such as a liability cap, proportionate liability or indeed a contractual arrangement between the auditor and the audited firm would all seem adequate means to deal with this issue. Obviously, liability would not be limited in cases involving wilful misconduct by auditors.

Mr McCreevy set out a series of other audit-related initiatives for 2008, including public consultation on ownership restrictions in the first quarter of next year; bringing forward to the first quarter a recommendation on the independence of inspection of audit firms and the establishment of an external quality assurance carried out by an independent public oversight body; and timely and correct implementation of the Statutory Audit Directive.

However, he said it was too early to decide on the statutory audit directive, in particular its article 26, which allows the commission to make ISAs mandatory for the EU, because the International Auditor and Assurance Board had embarked on a so-called ‘clarity project’ which aimed s at to define more clearly which parts of the ISAs should be mandatory standards and which parts guidance for the auditing profession.

Further reading:

FRC's auditor liability guidance is 'balanced and sensible'

FRC issues draft guidance to auditor liability