FEE wants cap put on auditor liability
The European Federation of Accountants is lobbying the European Union to reform corporate liability rules so that accountancy firms are better protected from negligence claims.
Link: Disclaimer threat to audit’s status
According to the FT, FEE believes this is vital to ensuring the Big Four are not reduced to three or fewer, following the collapse of Andersen under a mountain of negligence claims over its audit work at collapsed energy trader Enron.
David Devlin, FEE president, said reform should see a liability cap based on a multiple of a company’s audit fees.
FEE wants the reform demands to be put to the EU by the European Commission by April or May.
However it is likely to be met with some resistance from member states, who are reluctant to restrict liability given the profession’s poor reputation following a spate of global accounting scandals headlined by Enron, WorldCom, Tyco and Xerox.
Already in the UK, Big Four firms PwC and Ernst & Young have moved to limit their liability by publishing disclaimers at the end of their reports.