PracticeAuditBoost for liability overhaul

Boost for liability overhaul

The audit profession's campaign to persuade the government to overhaul auditor liability laws have received a boost, as institutional shareholders signalled they would not stand in the way of reform.

Link: The Debate: Is new liability legislation needed?

Talks between the audit profession and the government are ongoing as the Big Four continue to warn of an exodus from audit work if they do not receive improved protection against catastrophic negligence claims.

And this week, leading City figures said they would not oppose reform – as long as it was not done in isolation.

Peter Montagnon, head of investment affairs at the Association of British Insurers, whose members account for a fifth of all investments traded on the London Stock Exchange, said: ‘We have long been wary of capping auditor liability, but investors also need high quality audits.’

Montagnon said the ABI was taking a very close interest in the discussions and ‘will be formulating a position in due course’. The group is understood to be in active discussions with the Department of Trade and Industry.

Iain Richards, head of corporate governance and public policy at Morley Fund Management, said: ‘We want to get into a discussion with the profession and the government about what changes need to take place to ensure that we come up (with) and achieve a sensible framework.’

But he also warned that Morley would put a marker down with the DTI highlighting concerns that ‘further reductions in auditor liability, in isolation, would risk creating a serious imbalance in, or even undermining the UK’s audit framework’.

PricewaterhouseCoopers head of regulatory practice Peter Wyman acknowledged a package of reform was necessary. ‘Everybody sees the OFR as being really important. But without auditor liability reform you are not going to get anything other than a very legalistic, negatively worded and generally fairly uninformative audit opinion on the OFR,’ he said.

ICAEW president David Illingworth said a simpler solution might exist.

‘Auditors and their clients could agree in advance limits on their share of any losses. For the auditors this could be based on a multiple of the audit fee.’

Related Articles

BDO replaces Deloitte as Mitie auditor

Audit BDO replaces Deloitte as Mitie auditor

4d Emma Smith, Managing Editor
FRC closes KPMG HBOS audit investigation, Treasury Committee expects ‘full explanation’

Accounting Firms FRC closes KPMG HBOS audit investigation, Treasury Committee expects ‘full explanation’

6d Emma Smith, Managing Editor
PwC to audit BBC pay policies following gender pay gap outrage

Accounting Firms PwC to audit BBC pay policies following gender pay gap outrage

3w Alia Shoaib, Reporter
PwC fined a record £5.1m by the FRC over RSM Tenon audit

Audit PwC fined a record £5.1m by the FRC over RSM Tenon audit

1m Alia Shoaib, Reporter
KPMG fined £4.8m over Miller Energy audit

Audit KPMG fined £4.8m over Miller Energy audit

1m Alia Shoaib, Reporter
PwC to take over from Deloitte as Diploma auditor

Accounting Firms PwC to take over from Deloitte as Diploma auditor

3w Alia Shoaib, Reporter
Deloitte rises in auditor rankings with most FTSE 250 clients

Accounting Firms Deloitte rises in auditor rankings with most FTSE 250 clients

3w Alia Shoaib, Reporter
Latest Big Four auditor changes

Audit Latest Big Four auditor changes

1m Alia Shoaib, Reporter