Proposals that allow auditors to limit their liability to clients were expected to be put to parliament this week, although quid pro quo changes in law to increase auditor accountability may have to wait longer.
The draft companies bill, which has been described by the Department of Trade and Industry as a ‘suitable vehicle’ for several legislative proposals, including proportionate liability by contract, was scheduled to make its first commons appearance on Thursday.
A written parliamentary statement from DTI minister Jacqui Smith was understood by Accountancy Age to be the selected vehicle for its introduction.
Ministers gave consent for the inclusion of proportionate liability following a meeting in December between the government, auditors and investors. Agreement was reached that liability limits would be allowed if measures were taken to improve to quality of the audit process, including the reemphasis on the purpose of the audit as a service to shareholders.
Since last year’s meeting, the ICAEW’s Audit Quality Forum has put forward proposals on four key areas: questioning the auditor at AGMs, publishing engagement letters, enhancing resignation letters and naming audit partners in annual reports.
This week’s announcement, however, will come too soon for the recommendations make it into the bill with just two weeks since the proposals were sent.
Audit Quality Forum chairman Gerald Russell said that, should the government agree with the proposals, ‘there is no reason why we can’t get it into the legislative process at some point down the line’ of the bill’s progress.
He added that should the DTI need to carry out a separate consultation, there was little in the proposals that would be contentious.
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