PracticeAccounting FirmsDoom and gloom greets cap

Doom and gloom greets cap

'A moral hazard.' That was how Mary Francis, director general of the Association of British Insurers, described a cap on auditors' liability last week. Strong words indeed, particularly coming as they did in the wake of clear signs from DTI minister Jacqui Smith that a cap, pending OFT approval, was likely to go ahead.

Investors, and their professional bodies, have consistently argued against a cap. But as tempting as it may be for auditors to shrug their shoulders at Francis’ comments, research now shows she is not the only one worried about the implications of such a move. This week’s Accountancy Age/Reed Finance Big Question found that nearly half of those FDs questioned believed a cap would be anti-competitive.

Gloomy predictions accompanied the results. ‘The big shall get bigger, the small get smaller and the professionalism of the audits shall deteriorate further,’ said one clearly disillusioned FD. Another added: ‘The only people to benefit would be the large firms.’

These comments will hardly be pleasing for those who have argued for some time that a cap is needed to avoid the possibility of the Big Four turning into a Big Three. It is tempting to dismiss the comments as predictable and small-minded, but that would be a mistake. It’s clear that the Big Four have won a victory – but they must avoid gloating because, as our survey shows, the battle for client confidence may have only just begun.

Firms must now demonstrate to their clients that the cap will be worth it and that auditors can add value, provide quality, and contribute to the business in ways that go beyond simply ticking off the accounts. Reassurance will need to be plentiful and fast. This is no time for auditors to sit back and revel in triumph.

Related Articles

haysmacintyre celebrates partner promotion and additional hire

Accounting Firms haysmacintyre celebrates partner promotion and additional hire

1d Lucy Skoulding, Reporter
EY director joins Crowe Clark Whitehill as partner

Accounting Firms EY director joins Crowe Clark Whitehill as partner

5d Emma Smith, Managing Editor
RSM announces growth across every business line in 2017

Accounting Firms RSM announces growth across every business line in 2017

1w Lucy Skoulding, Reporter
WorkStyle: Helping accountants to support new contractors

Accounting Firms WorkStyle: Helping accountants to support new contractors

2w ClearSky Accounting | Sponsored
Grant Thornton grows profits while radically reshaping portfolio

Accounting Firms Grant Thornton grows profits while radically reshaping portfolio

2w Alia Shoaib, Reporter
How to protect LLP firms from a damaging team move

Accounting Firms How to protect LLP firms from a damaging team move

2w Clive Greenwood, Lewis Silkin
Grant Thornton reports gender pay gap at 26.6%

Accounting Firms Grant Thornton reports gender pay gap at 26.6%

4w Alia Shoaib, Reporter
5 ways to adapt your accounting services for millennial clients

Accounting Firms 5 ways to adapt your accounting services for millennial clients

1m Receipt Bank | Sponsored