EC sets liability timetable

Charlie McCreevy,
internal markets commissioner, told the JURI parliamentary
committee in Brussels yesterday he would formally recommend member states
prepare to limit auditors’ liability in the first quarter of 2008.

‘I do not intend to impose the means by which liability is limited. This will
be for each member state to decide,’ he said. ‘Existing solutions such as a
liability cap, proportionate liability or indeed a contractual arrangement
between the auditor and the audited firm would all seem adequate means to deal
with this issue. Obviously, liability would not be limited in cases involving
wilful misconduct by auditors.

Mr McCreevy set out a series of other audit-related initiatives for 2008,
including public consultation on ownership restrictions in the first quarter of
next year; bringing forward to the first quarter a recommendation on the
independence of inspection of audit firms and the establishment of an external
quality assurance carried out by an independent public oversight body; and
timely and correct implementation of the Statutory Audit Directive.

However, he said it was too early to decide on the statutory audit directive,
in particular its article 26, which allows the commission to make ISAs mandatory
for the EU, because the International
Auditor and Assurance Board
had embarked on a so-called ‘clarity project’
which aimed s at to define more clearly which parts of the ISAs should be
mandatory standards and which parts guidance for the auditing profession.

Further reading:

FRC’s auditor liability guidance is ‘balanced and

FRC issues draft guidance to auditor liability

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