Big Four auditors raise litigation fears with government

Proportionate solution: Peter Wyman

Representatives from the Big Four will this week urge government to introduce legislation to limit auditors’ liability in the event of a company collapsing.

Big Four firms were due to meet the Department for Business Enterprise and Regulatory Reform amid concern that auditors will face a wave of litigation from investors and liquidators who are trying to recover losses from big company failures.

Currently, an auditor can be sued for all losses when a company collapses, even if they were judged to be only partly to blame.

Peter Wyman, head of public policy at PricewaterhouseCoopers, said one compromise solution, which might satisfy the Securities and Exchange Commission, would be to limit auditor’s liability in law to the proportion of their client’s loss which they are responsible for.

Under this proposal, shareholders would have the power to overturn the auditor’s limited liability at a vote at a annual general meeting.

‘All we are saying is [that we should] be responsible for the damage we cause,’ said Wyman. ‘We cannot afford to be responsible for everybody else’s mistakes.’

In the UK, company directors can limit the liability of their auditor, with the agreement of shareholders, although, so far, no big companies are thought to have done so.

Last month, the SEC said it would block any such limited liability deals for companies that were also registered in the US.