Competition between species
When someone pulls out of a deal that was entered into in good faith, it can be incredibly frustrating.
I know exactly how this feels as I’m still waiting to be allowed to hire
Alien vs. Predator, from the local DVD shop, in return for being made
to sit through the utterly atrocious Bridget Jones: The Edge of
Reason. Yes, I know my choice is supposed to be a terrible blot on both the
Alien and Predator series of films, but I feel the suffering ought to be equally
shared.
My exasperation at this situation, however, is nothing compared to that of
auditors in the largest firms, who are starting to get more than a little peeved
with the investors they feel are backing out of a carefully brokered arrangement
to allow auditors to negotiate proportionate liability with their clients.
When former DTI minister Jacqui Smith managed to get investors and auditors
around a table to resolve their differences in December, matters finally seemed
to be drawing to a satisfactory conclusion.
Investors would not object to auditors being able to negotiate proportionate
liability. In return, a series of measures that could be resolved fairly quickly
would also be included in the company law reform bill, with other more long-term
projects addressed in an appropriate timescale by the newly formed Audit Quality
Forum.
The short-term work was concluded fairly quickly by the AQF, and got a
mention in the draft bill, with the forum now looking at bigger issues such as
audit purpose and competitiveness.
But investors have now become uncomfortable with the deal and want to see
some conclusions to this work before auditor liability can be limited, something
that won’t happen in time for this bill. Auditors will say they have done
everything asked of them and cannot operate in the way they are for too much
longer without great risk.
The final word now rests with the DTI. Can liability changes really happen
without the consent of investors, the end users, or will they feel that the
auditors have done everything asked of them? Oh, to be a fly on the wall at the
next AQF meeting. It could prove far more exciting, and possibly more violent,
than Alien vs. Predator.
Paul Grant edits the audit page