Few likely to step forward in audit liability deals

Few companies are expected to step forward to limit their auditors’ liability
before the changes to the Companies Act 2006 come into force next month, when
for the first time, companies can put in limited liability agreements.

‘It is a classic case of something that is needed in the interests of London
as a financial centre. It is part of the plumbing that needs to be put in place,
but it is not necessarily in any single company’s interest to do it,’ John
Griffith-Jones, head of
KPMG, told the
Financial Times.

When the Financial Reporting Council
presents the responses to its consultation over some prototype legal clauses,
the Big Four audit firms are hoping the regulator will return to another of its
favourite issues such as easing their domination of the audit market to avoid
huge lawsuits, which demolished the likes of Andersen in the wake of the Enron
scandal.

‘It would help give individual companies the justification for saying “yes”
to this when they’re going to be asking, “what’s in it for us?” Well, a greater
chance of the Big Four and others being around,’ Griffith-Jones said. ‘There is
a feeling among some that we’re all doing well enough without this, but it is
classic safety legislation that needs to be there.’

Further reading:

Leader: Is the combined code made to be
broken?

FRC revamps audit committee guidance

Read
story in the Financial Times