Treasury panel fails to agree on auditor liability

US auditors remain vulnerable to legal action after a Treasury Department
panel failed to deliver any effective recommendations which would protect
accounting firms from lawsuits threatening to close down their businesses.

The 21-member panel convened to improve the accounting profession was unable
to agree on whether the current system was fair and rational or whether auditors
needed protection from class-action lawsuits,

The big four firms left after Arthur Andersen’s collapse in the wake of the
Enron scandal and a series of mergers audit 98% of US companies, recording
annual revenues of more than $US1bn, according to the US government.

The panel did make some non-binding recommendations for areas which did not
include auditor liability and suggested the industry agree on an action plan for
troubled public company auditing firms and recommended the Public Company
Accounting Oversight Board should monitor potential sources of ‘catastrophic
risk at auditing firms to prevent reduced auditor choice and significant market

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Fiona Westwood of Smith and Williamson.