PracticeAuditBanks fear liability plans will pass buck

Banks fear liability plans will pass buck

Investment banks are concerned that auditor liability arrangements could land them with a huge bill

Sir Anthony Colman

Sir Anthony Colman

The London Investment
Bankers Association
said the ability of the audit profession to limit its
exposure could leave banks more exposed.

‘We are concerned to ensure that any limitation in auditor liability should
not result in an equal and opposite increase in liability of other advisors,
such as investment banks,’ said Ian Harrison, a director at
LIBA.

The FRC is currently consulting on liability arrangements.

A special committee, led by Sir Anthony Colman, produced draft guidance on
the issue that set out the possibilities that might be considered when auditors
re-write contract arrangements with clients.

The rules come into effect next month in line with new provisions in the
Companies Act, which allow for the limitation of liability either through
capping or proportional liability arrangements.

Sir Anthony’s working group discussed issues such as the timing relating to
the periods the agreements cover, the test for what constitutes a ‘fair and
reasonable’ limit, as well as the necessity of having shareholders approve the
agreements.

Investors are set to be presented with options for auditor liability
arrangements during their upcoming AGMs, but the Association of British Insurers
has already sent out a clear disapproval of moves to cap liability.

The FRC said the working group was to meet to discuss the responses to the
draft guidance.

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