The collapse of Big Five accountancy firm Andersen has put the issue of auditor liability back in the spotlight. The UK accountancy industry fears that if nothing is done another firm could follow Andersen raising concerns of competition, quality and ability of firms to conduct audits.
Speaking to Accountancy Age, Michael Snyder, the new chairman of the Corporation of London?s policy and resources committee, said: ‘The clear solution to this is proportional liability and I wish the government would grasp that one, because if you’ve got proportional liability the people who are perpetrating any errors would be the ones that bear the lion?s share as opposed to the deepest pockets.’
Until this month it looked like ministers were ready to move quickly to resolve the issue. But it now appears they have lost their appetite to grant audit firms a cap on their liability due to pressure from governments in Europe and the US, and from some investment bankers and directors, not to impose a ceiling.
Snyder did acknowledge the difficulties in changing the law. But he added: ‘If you wanted to get it right or fair then they would go down that route. Where the culpability is, is where the liability rests.’
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