US panel calls for auditor liability

Link: Illingworth: Liability cap will benefit investors

The American Assembly, a panel of over 50 influential financial figurese including PCAOB chairman William McDonough and FASB chairman Bob Herz, has published a report in which it claims that audit firms’ performance has been detrimentally affected by the fear of disastrous litigation instigated by angry investors. This fear resulted in audited statements that conformed to accounting rules but hid the true financial picture of a company.

The report suggests that audit firms whose work meets the highest standards should be protected from ‘frivolous’ lawsuits. It did however acknowledge that there was currently little appetite in the US for such measures, following a series of corporate scandals and that auditors would first have to prove their worth, according to the Financial Times.

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