PracticeAuditBolkestein to debate regulation

Bolkestein to debate regulation

Big Four firms anxious to secure an audit liability cap from the government could hear next week whether the move has the backing of the European Commission.

Links: Auditor protection on the cards

and Wyman calls for liability cap

European internal markets commissioner Frits Bolkestein will be in London on Monday to take part in a debate on the proposed changes. Accountancy figures in the UK will be eager to know which way his views swing.

The UK government is understood to be developing proposals on a cap, but opposition from Europe could be an obstacle to its introduction.

The liability of auditors is becoming an increasingly political subject, with trade secretary Patricia Hewitt expected to make her plans known on the subject before the start of the next parliamentary term.

A response to a parliamentary question from Jim Cousins, MP, suggested she was well on her way to making a decision.

‘The government is considering proposals on auditor liability in the company law review and will consult on its own detailed proposals in due course,’ said Hewitt.

According to Cousins, this gave a ‘very strong indication’ that Hewitt would introduce legislation to cap the financial liability of auditors later this year. Peter Wyman, president of the ICAEW, called for a financial cap two weeks ago. ?The commercial insurance market will not insure the risk of a large claim against an auditor, yet the audit firm is expected to have unlimited liability,? he said.

‘We are living in an increasingly litigious society. The audit firms are private partnerships, they do not have vast reserves. And the risk they are asked to carry is uninsurable.’

Set to speak at the London Underwriting Centre, Bolkestein will offer the European Union perspective on the implications of recent and proposed changes to liability provisions. This will include both its view on the introduction of controversial liability disclaimers and recent revelations about proposed financial caps.

It is thought Bolkestein will discuss moves by International Accounting Standards Board chairman David Tweedie to get EU-listed companies to compile consolidated accounts using international standards.

Bolkestein is expected to offer his opinion on the effects of double regulation by US rules and those of local regulators. This has proved to be an area of concern after the Securities and Exchange Commission in the US told British accountants that the recently introduced audit disclaimer was not acceptable.

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