Business secretary Lord Mandelson is to come under renewed pressure to limit
auditors’ liability by statute as the economic situation deteriorates and the
risk of a major audit firm exiting the market increases.
Last week US regulators indicated to the UK government that they would not
accept agreements between an auditor and clients registered in the US that limit
liabilities on a proportionate basis.
The news delivered a blow to hopes for a liability cap but key figures in the
profession have now switched their attention to lobbying for statutory change
permitting caps. It is understood that the government official likely to face
the call will be Geoff Dart, a director overseeing governance and corporate law
at the department for business.
‘It’s a major disappointment that the SEC has taken this stance. It’s
important that there’s a proper reaction from the UK authorities on this matter
because otherwise we are getting to a stalemate at precisely the time where the
pressure on auditors is growing,’ said Martyn Jones, national audit technical
partner at Deloitte.
It is understood the SEC’s main objection is the potential abuse of auditor
independence due to an overly cosy relationship between auditors and company
Peter Wyman, head of professional affairs at PricewaterhouseCoopers, said:
‘The reality is that this is an agreement between auditors and shareholders.
There’s no independence impairment.’
The Companies Act 2006 removed a previous legal bar to limited liability
agreements (LLAs) to allow auditors to agree proportionate liability with
clients on a contract basis. With the SEC decision disallowing LLAs with around
half of the FTSE-100 because they are listed in the US, the uneven playing field
will make it difficult for auditors to reduce their exposure with other listed
Campaigners believe the position would change if proportionality is written
into law. The department for trade, although it has opportunities over the next
six months to legislate on the issue, said it ‘has no plans to legislate
‘We need this done and we need it done quickly. If there was a need before
the credit crunch then we need it now more than ever. I don’t think it’s a big
shift in policy. You can get the same end but by law,’ said Wyman.
Two new audit partners have been appointed at the firm BDO in its audit practice following continued growth and investment
"The whole idea of HMRC officials supplying confidential information about individuals to the media on a non-attributable basis is, or should be, a matter of serious concern," say Supreme Court judges
Investment in people, tech and businesses impacts on EY's profit per partner figure
If businesses do not take cyber security seriously in their business planning regulators may do it for them, the ICAEW has warned