US panel calls for auditor liability
An influential US panel has mirrored calls from the UK accountancy profession by suggesting that auditors in America should be given some form of liability protection under a new model of financial reporting.
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.