Mid-tier firms break ranks on audit cap
In a move likely to open deep divisions in the UK accountancy industry, the biggest mid-tier firms have written to the ICAEW claiming a cap on auditors' liability would be a 'second-class' policy.
Link: ICAEW president pushes for liability limit
An audit cap of around £200m has so far been mooted but, say mid-tier operators, this would only benefit the Big Four audit firms and not work in the public interest at a time when credibility in the profession is most needed.Accountancy Age has learned that a letter has been sent to president of the ICAEW David Illingworth asking for the debate to be widened and for more research into ‘proportionate’ liability.
Jeremy Newman, BDO managing partner, said a cap would be an ‘arbitrary figure’. He added: ‘It would not operate in the public interest.’
Michael Cleary, national managing partner at Grant Thornton, agreed with his concerns telling Accountancy Age that a cap ‘is pretty dangerous and needs to be considered with great care. It is to my mind the last resort’.
A legal source close to the profession said: ‘I hope the government’s got the guts to say no. I find it extraordinary that Hewitt is giving it parliamentary time at all.’
The letter will also bring the mid-tier firms into confrontation with ICAEW members who have been lobbying hard for measures to limit the size of damages awarded against the biggest firms.
Peter Wyman, former ICAEW president and now the government’s accountancy ambassador, has argued consistently for a limit on liabilities, whether the change is a cap or proportionate liability.
The department of trade is looking at the issue within the review of company law, which former competition minister Melanie Johnson was overseeing until she left the department this week.
ICAEW technical director Robert Hodgkinson acknowledged that a cap would be ‘a second-class alternative’. But he said: ‘The institute doesn’t have a magic formula for people to pick holes in.’
KPMG CEO John Griffiths Jones said Big Four firms faced particular difficulty because they cannot get insurance cover to safeguard against an Andersen-sized disaster.