Brussels' auditor liability report reveals claims danger
Risk managers of EU audit firms are dealing with 28 outstanding claims and face paying out millions, according to long-awaited auditor liability report
Risk managers of EU audit firms are dealing with 28 outstanding claims and face paying out millions, according to long-awaited auditor liability report
Brussels’ long-awaited auditor liability report reveals
that risk managers of EU audit firms are dealing with 28 outstanding claims in
excess of €75m, of which 16 are in excess of €160m and five are in excess of
€750m. According to the audit firms, six of these 28 outstanding claims fall
under US jurisdiction. The remaining claims originate from within the EU.
The figures, revealed from the office of Internal Markets Commissioner,
Charlie McCreevy, are for cases as of 31
October 2005, as reported by the Big Four, as well as Grant Thornton and BDO
Stoy Hayward.
The report follows an independent study, commissioned McCreevy’s office on
the economic impact of current auditors’ liability and insurance conditions.
In October last year, the Commission published an economic impact study
prepared by an external consultant, London
Economics.
In line with this report, the commission proposes the following four options
for reforming auditors’ liability:
McCreevy acknowleged the increasing trend of litigation against auditors.
‘There is an increasing trend of litigation against auditors, but often they
cannot obtain sufficient insurance to cover the risk,’ he said. ‘So there is a
real danger of one of the “Big Four” being faced with a claim that could
threaten its existence.
‘There are many ways to improve this situation: some Member States already
have capped auditors’ liability, while others are introducing proportional
liability combined with some limitations on who can sue auditors.
‘However, given the differences between national markets, there is probably
no one-size-fits-all approach. I want to ensure a thorough debate on the
possible ways forward, and I encourage interested parties to give us their
views.’
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