Cap on liabilities looms

Link: FEE wants cap put on auditor liability

Amid intense speculation and ‘persistent rumours’ trade secretary Patricia Hewitt is expected within a week to explain the government’s view after considering whether auditors should receive added protection from excessive claims for damages with a cap on liabilities. A decision to go ahead could provoke a barrage of criticism, especially after the huge scandals involving Enron and WorldCom.

But a source close to accountancy regulation told Accountancy Age that UK auditors had ‘definitely succeeded in persuading the government’.

Labour MP Jim Cousins, has posed the parliamentary question asking whether the department of trade is pushing ahead with a cap. ‘It is absolutely clear that some of the big auditing firms want to cap their liability,’ said Cousins. ‘As I understand it, they are lobbying the EC quite hard, but also lobbying the national government here quite hard.

‘At some stage I think it is highly likely an attempt to do that will be made. I think the whole thing is extremely undesirable,’ said Cousins.

‘It suggests there is a charmed circle of people who can get a ticket from the government that means they can survive forever on their own terms.’

A DTI spokesperson said an announcement would be made soon.

Related reading