PracticeAccounting FirmsDTI prefers auditor liability cap

DTI prefers auditor liability cap

The government is more likely to impose an audit liability cap than a proportional system in what could be a crushing blow to mid-tier accountancy firms, according to DTI minister Jacqui Smith.

Link: The Debate: Is new liability legislation needed?

A liability cap is not supported by the industry as although it would protect the Big Four from catastrophic legal action, it would do little to protect mid-tier firms.

But speaking today, DTI minister Jacqui Smith, gave the clearest indication so far that a cap on auditor liability will be introduced.

‘Because proportional liability has been ruled out on numerous occasions we are not [looking] at the moment to return to that,’ she said. ‘But we will be looking at a variety of options for capping liability.’

The government has launched a consultation period in which interested parties have the chance to outline their preferences, although Smith indicated there was little room for manoeuvre for those hoping for proportional liability.

She went on to say that the government was hoping to release the consultation ‘by the end of the year’ and that ‘when you see the consultation you will see that [a cap is the more likely option]’.

Peter Wyman, senior partner at PricewaterhouseCoopers, said he would be ‘astounded’ if the government opted for a straight blanket cap on auditor’s liability. He said that a system of capping liability by contract would be the preferred option.

Eric Anstee, chief executive of the ICAEW, said: ‘We want to move to a proportionate liability regime and think they should repeal section 310 of the companies act to allow that to happen.’

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