John P Coffey, an eminent lawyer with New York’s Bernstein, Litowitz, Berger
and Grossmann, used his appearance before the group to lay into the firms and
insist that the case for a cap on liabilities had not been made by them.
The group, appointed by the US Treasury secretary and headed by the tough
minded former SEC chief Arthur Levitt, is looking at the concentration of the
audit market, but is considering a cap just as it was considered here in the
UK and then introduced as a quid-pro-quo to audit firms for tighter regulation.
But Levitt may not be so taken with the idea. The US is a litigious nation
and limiting up front what can be claimed may not sit well with its legal
culture. If a cap fails to find favour, however, what use is a cap in the UK?
It would, of course, limit the damage from UK court action but open-ended
claims in the US would still leave a branch of the firm on this side of the
The question is why? If legal action in the US killed off the firm, the
reputational damage to the firm worldwide is still likely to be considerable,
just as with Andersen.
More to the point, it is likely to stymie any thoughts that a UK firm could
formally merge with a US member of the network, as they have started to do in
Europe. The risk would be too big or at least as big as the Big Four faces in
not having a cap.
UK seniors partners must be watching proceedings across the Atlantic with
some significant interest.
Does Darwin's theory apply to taxation? Colin ponders...
The EC has been instructed to draft a European Union (EU) directive authorising an EU financial transaction tax, which would apply to ten of the EU’s 28 member states
Accountancy watchdog the FRC has dropped its investigation into the former chief financial officer of Tesco, nearly two years after the supermarket was engulfed in an accounting scandal
Colin imagines how Apple's logo might change in the wake of the EC's ruling over its Irish tax arrangements