Auditor liability back in bill
Indications are strong that proportionate liability will appear in the companies bill, hinging on the profession providing certain guarantees.
Link: Hopes still high for liability reform
Confidence is riding high that proportionate liability will make it into the companies bill ahead of the general election this year, and before a series of freshly launched taskforces have the chance to report on the vexed issue of auditors’ duty of care.
DTI minister Jacqui Smith brokered a deal between investors and auditors late last year that would allow auditors to negotiate proportionate liability by contract in return for increased responsibility and transparency. It would also see the introduction of a new criminal offence around fraudulent or reckless auditing that could result in jail time.
Taskforces are now set up, spearheaded by the ICAEW, to look at five key issues. These are the contents of audit reports: the questioning of auditors at, or before, an agm; terms of auditor engagement; resignation and issues of defamation; and finally, competition in the UK audit market.
While the issues may take some time to resolve, an announcement from the government on proportionate liability is expected much sooner.
‘I believe the government is now absolutely committed to introducing proportionate liability by contract into the companies bill,’ said Peter Wyman, head of professional affairs at PricewaterhouseCoopers (pictured). He added that, provided the government can see the profession is fulfilling its side of the bargain, it would be able to press ahead on legislation without firm conclusions on the other issues.
A DTI spokeswoman concurred that ‘the broad approach has been agreed, but there are details to be finalised’. Movement on the issue is expected in the next few weeks.
The timing and outcome of the next general election – predicted for May – will still play a key part in whether auditors get what they are after. Even if proportionate liability makes it into the draft bill soon, it is not expected that the bill will be ready in time for a summer election. Only if the Labour party is returned to power is it certain that a final version of the bill will receive royal assent.