Shadow trade minister Andrew Mitchell today proposed three seperate amendments to the companies bill on three seperate methods for limiting liability. All were withdrawn for lack of support.
Mitchell proposed that auditors be allowed to limit liabilities on a proportional basis by contract but added two further ideas – a limit to 20x audit fees and an across the board flat rate cap of £75m.
He complained about the government’s inaction and said a cap would have encouraged smaller audit firms to bid for large audit contracts.
Trade minister Jacqui Smith said the Tory proposals raised fresh issues and could not be supported. She added she was keen to make progress and would hold talks with key players.
He remarks have been interpreted as leaving the way open for proportionate liability in the future bill, now thought likely to go ahead next year.
Neil Lerner, head of regulatory affairs at KPMG, said: ‘We believe that the intellectual case for liability reform has been won. Investors, business and the accounting profession are united in supporting the principle of proportionality by contract.’
He added: ‘We remain confident that the government will ensure that we grasp this historic opportunity for reform in the interests of the UK economy and capital markets.’
Senior figures from the Big Four firms had once been optimistic of a cap being introduced in today’s bill but it is understood, from those close to the discussions, that while the department of trade had been persuaded, the Treasury remained inconvinced and killed the idea. It is believed Gordon Brown himself was unsympathetic to the position of auditors.
Meanwhile Labour MP Jim Cousins has been attempting to introduce a further amendment that would ban firms from carrying out consulting work for audit clients. Cousins’ proposal is also expected to fail.
Simon Wright of CareersinAudit.com discusses how an effective cyber defence force is critical to businesses worldwide and how internal auditors can make the transition to a new career in cyber security
The FRC has said that the investigation will 'consider, but not be restricted to, issues regarding misstated accounting balances'
Craig Maxwell joins the audit and assurance team in Scotland
Stephen Grayson to join the audit department in Manchester