Proportionate liability is still a good deal
Accountants and business representatives vehemently upheld the business benefits of proportionate liability on Tuesday despite the government's decision to bury any hopes of a cap.
Link: Liability cap special report
Patricia Peters, head of corporate governance at the Institute of Directors said the biggest benefits to proportionate liability would be its ability to support an open market for audit. ‘There are serious issues as to whether people are prepared to go on conducting (audit) business,’ she added.
Chris Connor, senior partner at Robson Rhodes, and Peter Wyman, head of professional affairs at PwC supported this belief. ‘Over time it could create an environment where more firms might be prepared to enter the arena,’ said Connor.
Wyman believes proportionate liability ‘would encourage mid-tier firms to come into the FTSE250’. Practically all FTSE250 companies are audited exclusively by the Big Four accountancy firms.
He re-emphasised that auditors were not trying to duck responsibility for their mistakes but to take responsibility only for the errors they make, not those of others.
Connor stressed more protection would also encourage others involved in governance to ‘take their responsibility more keenly’.
Limiting liability proportionately by contract, as suggested this week by the government, would bring greater transparency for shareholders and the investor community, added Connor.