The London Investment Bankers Association said the ability of the audit profession to limit its exposure could leave banks more exposed.

'We are concerned to ensure that any limitation in auditor liability should not result in an equal and opposite increase in liability of other advisors, such as investment banks,' said Ian Harrison, a director at LIBA.

The FRC is currently consulting on liability arrangements.

A special committee, led by Sir Anthony Colman, produced draft guidance on the issue that set out the possibilities that might be considered when auditors re-write contract arrangements with clients.

The rules come into effect next month in line with new provisions in the Companies Act, which allow for the limitation of liability either through capping or proportional liability arrangements.

Sir Anthony's working group discussed issues such as the timing relating to the periods the agreements cover, the test for what constitutes a 'fair and reasonable' limit, as well as the necessity of having shareholders approve the agreements.

Investors are set to be presented with options for auditor liability arrangements during their upcoming AGMs, but the Association of British Insurers has already sent out a clear disapproval of moves to cap liability.

The FRC said the working group was to meet to discuss the responses to the draft guidance.