PracticeAuditGovernment may have to revisit liability

Government may have to revisit liability

Government may need to legislate again to sort out auditor liability mess, says Baker Tilly

The government’s new auditor liability limitation regime was lurching towards
crisis this week, as one auditor suggested the government may have to legislate
again to sort out the mess.

Audit firms are frustrated with the
Financial Reporting Council
for delaying crucial guidance on the moves, which they say will hold up the
agreements. Limited liability contracts are unlikely to be signed this AGM
season. There are further concerns that companies listed in overseas
jurisdictions may not be able to limit liability and some expect the government
may have to intervene again.

The FRC is still working on guidance on the issue, but it has only reached
draft stage,
despite the rules allowing limited liability arrangements coming in this week.

‘We don’t have any robust [liability] agreements in place, although the
government intended for the law to come into effect in April, because we’re
waiting for guidance from the FRC,’ said Jeremy Newman,
BDO
Stoy Hayward
managing partner.

The contracts have been heavily lobbied for by the audit firms, who are
worried about the lawsuits they face, and want at least ‘proportional’
liability.

But companies are understood to be reluctant to sign up to the arrangements,
with many ‘still asking why this is a good thing,’ the Association of British
Insurers said.

‘On what basis can directors of companies say that entering into a limited
liability contract is in the best interest of the company?’ said Herbert Smith
partner Hardeep Nahal.

The
Confederation
of British Industry
said this week that there may even be problems for UK
companies listed overseas in limiting liability, because of the need to consid
er the rules on contracts in other jurisdictions.

‘If there is no agreement in place, then one can anticipate the limited
liability arrangements won’t take place, and may need to go back to government
again,’ said Baker Tilly managing partner Laurence Longe.

FRC chief executive Paul Boyle said: ‘What we’re going to produce is
guidance. If people wish to go ahead and make an early start, they’re free to do
so. I’m not sure that anyone is actually being held up by us at this stage.’

Related Articles

PwC replaces EY as Domino's auditor

Audit PwC replaces EY as Domino's auditor

6d Alia Shoaib, Reporter
The ‘uncomfortable truth’ behind FRC’s Big Four fines recommendations

Audit The ‘uncomfortable truth’ behind FRC’s Big Four fines recommendations

2w Carl Johnson, Stephensons
BDO holds off Big Four to retain top position as AIM auditor

Audit BDO holds off Big Four to retain top position as AIM auditor

2w Alia Shoaib, Reporter
FRC urged to fine Big Four firms penalties over £10m

Audit FRC urged to fine Big Four firms penalties over £10m

4w Alia Shoaib, Reporter
EY to audit Standard Chartered bank

Audit EY to audit Standard Chartered bank

1m Alia Shoaib, Reporter
KPMG replaces PwC as Croda auditor

Accounting Firms KPMG replaces PwC as Croda auditor

2m Emma Smith, Managing Editor
EY fined £1.8m over Tech Data audit

Accounting Standards EY fined £1.8m over Tech Data audit

2m Emma Smith, Managing Editor
Top 50+50: Firms post significant growth in new tax and audit rankings

Audit Top 50+50: Firms post significant growth in new tax and audit rankings

2m Emma Smith, Managing Editor