PracticeAuditAuditor liability cap called for once again

Auditor liability cap called for once again

European commissioner of internal markets urges for liability limits to be introduced for audit to prevent four becoming three

The European Union’s Internal Markets
commissioner, Charlie McCreevy has once again called for a
cap on auditor liability, to guard against another collapse of a Big Four firm.

McCreevy was commenting during a Financial Times interview, on
mounting concern in the industry over the ripple effects in the business
community in the event of a four becoming three.

‘The market is restricted to the Big Four firms. There were six not so long
ago,’ he said.

Six firms were reduced to five in 1998 after Pricewaterhouse and Coppers
& Lybrand merged. Then the Anderson network dissolved following shocking
revelations at Enron in 2002.

Since then, the Big Four have consistently called on government to introduce
limits as to the extent for which an auditor may be liable, especially as
auditor liability insurance has sharply declined.

McCreevy’s office is due to issue a policy paper on auditor liability by the
end of the year.

Further reading:

EU probes audit competition

Big Four gains support on liability argument

EC study favours auditor liability cap

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