The UK regulator has announced a working group to prepare guidance on auditor liability agreements.
This follows requests from the profession, who felt more clarity was needed on the liability provisions within the Companies Act 2006, which now allows auditors to negotiate with companies whose accounts they are auditing
The group, chaired by former Commercial Court Judge, Sir Anthony Colman, has been tasked with producing draft guidance for public consultation later this year.
The draft guidance will address the form such agreements would take, and the process by which they would be agreed, but will not seek to define what a 'fair and reasonable' amount would be.
FRC chief executive Paul Boyle said: 'Earlier this year the FRC was approached by the accountancy profession and asked whether it would be willing to prepare guidance on the use of these liability limitation agreements.
'We agreed to do so only if the proposal was also acceptable to the corporate and investment communities and that remains the basis on which we will proceed. The FRC will only give its endorsement to guidance that enjoys broad support from all market participants.'
The members of the working group are:
- Sir Anthony Colman (chairman)
- Richard Bint, head of professional services, PKF (UK) LLP
- Neil Brown, head of governance and responsible investment, Threadneedle Asset Management Ltd
- Lisa Cameron, general counsel, Ernst & Young
- Vanessa Knapp OBE, partner, Freshfields Bruckhaus Deringer
- Paul Lee, director, Hermes Equity Ownership Service
- Rosemary Martin, general counsel, Reuters Group PLC & Vice-Chair GC 100 Group
- Peter Smith, chairman, Savills plc
- Chris Hodge, Financial Reporting Council (secretary)
Observers:
- Richard Fleck, chairman, Auditing Practices Board, Financial Reporting Council
- Richard Leyland, director, Corporate Law and Governance Directorate, Department for Business, Enterprise & Regulatory Reform
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