PracticeAuditHasty decisions are a liability

Hasty decisions are a liability

Today (12 March) sees the closure of the hastily arranged and rather short consultation period on auditor liability.

The reason for its brevity is quite clear. The companies bill, in which auditors hope it will be included, is already passing through parliament and if there is any chance of this happening decisions need to be made very quickly.

Unfortunately the speed at which it has been carried out means that there has been very little time to resolve the dissent that has surfaced from the investor community over the issue. A DTI meeting last month brought together both sides of the argument to put forward their cases, but very little headway, if any at all, was made at the talks.

Former ICAEW president Peter Wyman has spent much time recently in conversation with various representatives from interested parties, and to his credit has managed to persuade many of them over to the benefits of limiting auditor liability.

He has claimed the backing of the CBI, the Institute of Directors, influential business figures and many investors.

The head of the Hundred Group of Finance Directors, Jonathan Symonds, has also backed calls for a cap.

But many within the investment community remain unconvinced by the argument – bodies with significant weight and responsibility for a lot of money floating around the stock market. Their submissions to the DTI are likely to make striking and contentious reading.

As a result, the debate is balanced on a knife-edge, and the government could still fall either way. If Wyman has managed to drum up enough support for auditors from influential business representatives to offset grumbling from investors, then the chance of getting a liability cap is greatly increased.

But if rumours are true that certain civil service figures are looking for any sign of dissent and division to justify killing the cap debate, then the prospect of a cap becomes far less certain and perhaps marginal.

With the posturing and deliberation all but over, it is now time for the government to lay its cards on the table and let everyone know just which way it is going to go.

  • Paul Grant, edits the audit page for Accountancy Age

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