Auditor liability firmly on government’s agenda

Link: Reshuffle casts doubt on liability reform

Auditor liability is back on the parliamentary agenda after the company law reform bill featured in this week’s Queen’s speech – but it could struggle to get sufficient parliamentary time to become law.

During the state opening of parliament, the Queen said that ‘company law will be reformed to encourage greater levels of investment and enterprise’. The bill, which was introduced in draft form during the last parliamentary session before the general election, proposes measures that would allow auditors to negotiate proportionate liability by contract.

But a more finalised version of the legislation will have to fight with another 44 bills and five draft bills to make progress through a busy parliament schedule over the next 18 months.

‘We note that the legislative programme is heavy, but this process started some seven years ago, so we hope the bill will be introduced to parliament as a priority item, once the consultation on the white paper has been completed,’ said Tony Bromell, head of accountancy markets and ethics at the ICAEW.

Neil Lerner, UK head of risk management at KPMG, said that, as with other legislation, ‘if things go wrong with other bills then you never know what will happen’. But he added that it was an uncontentious bill that had support from the opposition.

He predicted that auditors should be able to negotiate proportionate liability with clients by the end of next year.

The government is also set to allow accountants to own, invest in and manage law firms, opening the way to the kind of multi-disciplinary

practices explored in the past by the largest accountancy firms. A draft bill was announced that will be consulted on next year. MDPs could become a reality by the end of this parliament, observers believe.

While a second finance bill was not included in the Queen’s Speech, the Treasury confirmed that measures dropped in the run up to the election – in the main contentious avoidance measures – will be included in an early bill.

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