PracticeAuditLiability saga draws to a close

Liability saga draws to a close

Stage is finally set for the introduction of limited liability agreements - now that all parties seem happy with it

After what seems like an eternity of wrangling, constant lobbying and to-ing
and fro-ing between the government and the accounting profession, the stage is
finally set for the introduction of limited liability agreements that all
parties seem happy with.

As the company law reform bill entered the final stages of its passage
through the House of Lords, amendments were introduced that, according to Lord
Goldsmith, would ‘make it clear that liability limitation agreements can be
expressed in any way and are not, as some feared might be the case… restricted
to being expressed as pure monetary amounts or such amounts expressed with
reference to a formula’.

The move received support from the opposition, with former ICAEW president
Dame Sheila Masters, now in the Lords as Baroness Noakes, stating she was ‘very
pleased’ to see the amendments in the bill.

Even the inclusion of a new power that allows the secretary of state to make
regulations about how liability agreements are expressed failed to spoil the
positive mood.

Its addition is a pre-emptive measure in case the proposed liability
agreements turn out to be anti-competitive for mid-tier firms.

‘On liability, the government has listened to professional concerns, with the
end result being we are where we expected to be,’ says Peter Wyman, head of
professional affairs.

Concerns remain over the introduction of a criminal offence for ‘knowingly or
recklessly’ providing an incorrect audit opinion, but little sign of movement on
this is expected.

But if the government hopes the concession will lead to a smooth passage
through parliament, it could be sorely mistaken, with Friends of the Earth
rallying support from hundreds of MPs over the decision to scrap the OFR.

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