Mid-tier at risk from company law reforms
Profession warns of greater exposure to negligence claims
Law reforms aimed at reducing the potential for damaging lawsuits being filed
against accounting firms, will put mid-tier firms at an even greater risk than
under the present rules, the Big Four has warned.
Confidential legal advice drafted for the Big Four and seen by the
FT, suggests that parts of the company law reform bill could lead to
courts imposing disproportionately heavy fines on mid-tier firms.
The bill, which is being debated in the House of Lords, says liability should
be proportionate and allows auditors to negotiate agreements with clients
limiting their exposure.
The fear is that the largest firms would in effect set an industry-wide
ceiling for payouts. While a limit of £200m might protect a Big Four firm from a
potentially catastrophic claim, it would be disastrous for a smaller firm.
It is understood that separate advice, drawn up for the Institute of
Chartered Accountants in England and Wales, has raised similar concerns.