Fears that government intransigence over the wording of auditor liability
legislation could force accountants to negotiate caps against their wishes have
been allayed following talks with the profession.
The Department of Trade and Industry remains convinced that clauses on
liability limitation, as they currently stand, allow for the negotiation of
proportionate liability without having to mention a cap, but it has signalled a
willingness to alter them if concerns remain.
‘As it stands we believe it is properly drafted but specific concerns about
the exact phraseology have been raised,’ said a DTI spokeswoman.
‘We are talking to auditors about that and if it emerges that a slight
re-wording to clarify that point is necessary, then we will do so, although our
advice at the moment is that it does do what auditors want it to do when they
asked for the cap,’ she said.
The move signals a climbdown from the department’s previous stance, and
should provide much relief to the profession. Following legal advice on the
wording of the clauses, the country’s biggest auditor was concerned that it
might be forced to negotiate a monetary cap with audit clients rather than
Gerald Russell, senior partner at Ernst & Young, said: ‘This is a
sensible point of view and from the profession’s point of view some tweaking is
needed to establish the government’s intentions when Patricia Hewitt announced
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