European commissioner Frits Bolkestein outlined the EC’s position on a cap at a London event on Monday, declaring that unlimited liability was a ‘quality driver’ and that a cap would damage attempts to restore investor confidence. ‘The commission is not about to propose a swift intervention to limit the liability of audit firms,’ he said.
Peter Wyman, president of the ICAEW, said Hewitt would probably be unaffected by the EC stance, and that he was also unperturbed by Bolkestein’s comments.
‘I was never relying on support from the commission. It doesn’t seem to me that there is anything to stop the UK government from moving to legislation,’ he said.
Wyman also said the commission might not be fully aware of the UK situation.
‘We are very much more litigious, there is no insurance and there is unlimited liability. We also have a third of the total capital market of Europe based in London.’
However, Bolkestein did acknowledge this by admitting that the costs of audits in litigious states may be higher than elsewhere, and that there may be a knock-on effect for insurance premiums.
Richard Beaty, a professional risks partner at law firm Beachcroft Wansbroughs, said if the UK introduced a liability cap, the commission would have to take action. ‘I don’t see how the commission would be able to avoid doing so,’ he said. Bolkestein also criticised the UK’s stance on liability disclaimers. ‘The commission is somewhat concerned about the recent modification to some UK audit reports, which seem, in response to the ruling in the Bannerman case, to try to limit auditor liability to third parties,’ he said. – Go to www.accountancyage.com/news/ 1132697 for more.
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