FDs hit out at auditors

The Accountancy Age/Reed Accountancy Personnel poll showed that 66% of FDs are against auditors limiting their liability in cases of negligence, while only 27% support limiting the amount that audit firms are sued.

The findings clearly put FDs in opposition to proposals in the Company Law Review, published recently, which would offer auditors greater protection and make it less likely that they could be sued.

Among those against auditors setting limits, many believe the quality of the audit would suffer if a ceiling was placed on the amount for which auditors can be sued. According to one FD: ‘They have to be accountable for the power they wield. Reducing that may cause less care and dedication on their part.’

David Neve, FD at Thamesdown Software Fulfilment, said auditors are ‘not responsible enough anyway. If you get paid for something, you must deliver.’

Respondents on both sides of the argument objected to inflated auditors’ fees.

One FD said that auditors should cap their liability ‘if they charged a reduced fee’, while another was against the limit because ‘their fees are so high anyway that they always win. They want to have their cake and eat it.’

But very few among those supporting auditors do so wholeheartedly.

‘The amount depends on the size of the audit fee,’ says one FD. ‘There are times when auditors will have incomplete information.’

Some of those speaking out for limiting liability believe this would restrain the UK from becoming too litigious.

‘The American culture of ever-increasing claims should be brought to an end,’ said one FD.

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Reforms could protect auditors

End Big Five compensation show