Government to grant auditors' wishes
Parliament to press ahead with proportionate liability after titanic battle
Auditors have emerged victorious from their titanic battle with investors
over proportionate liability after the government today unveiled draft clauses
that would allow them to negotiate limited liability with clients.
In a written statement to parliament, minister of state for industry Alun
Michael revealed that proposals will go forward into primary legislation that
would reform the liability regime for auditors, largely as had been set out in
the government’s consultation document in March.
The move comes despite strong opposition from key investor bodies, who are
concerned that this protection, in conjunction with other measures, is
threatening audit quality.
The government also said it will look into enshrining in legislation the
Caparo case ruling on the nature of the duty owed by auditors to members of a
company, further protecting auditors’ exposure.
The 1990 House of Lords ruling said auditors ‘do not, in general, have a duty
of care to individual shareholders or potential shareholders in a company whose
accounts they audited’.