Treasury panel fails to agree on auditor liability

US auditors remain vulnerable to legal action after a Treasury Department panel failed to deliver any effective recommendations which would protect accounting firms from lawsuits threatening to close down their businesses.

The 21-member panel convened to improve the accounting profession was unable to agree on whether the current system was fair and rational or whether auditors needed protection from class-action lawsuits, Reuters reports.

The big four firms left after Arthur Andersen’s collapse in the wake of the Enron scandal and a series of mergers audit 98% of US companies, recording annual revenues of more than $US1bn, according to the US government.

The panel did make some non-binding recommendations for areas which did not include auditor liability and suggested the industry agree on an action plan for troubled public company auditing firms and recommended the Public Company Accounting Oversight Board should monitor potential sources of ‘catastrophic risk at auditing firms to prevent reduced auditor choice and significant market disruptions’.

Further reading:

Court upholds $US183m award against PwC

UK and US part ways over Enron response