Limited liability agreements blocked by US
Lobbying begins to have limited liability agreements made mandatory in the UK
Agreements that could have limited auditor liabilities have been effectively
blocked by the US financial watchdog, according to reports.
The FT reports that the Securities and Exchange Commission has told the UK
government that it will not accept agreements between an auditor and clients
registered in the US to limit liabilities on a proportionate basis.
UK rules allow auditors to sign agreements with clients to limit their
liability on a proportionate basis. However, auditors have been waiting to see
if the US would green light the agreements because so many large UK companies
are also traded on Wall Street.
Without US backing it is unlikely any agreements will be struck despite
reports that talks had already begun between international audit firms and their
clients.
Peter Wyman of PricewaterhouseCoopers is reported saying the door has been
‘slammed shut’.
Last year a report compiled for the SEC indicated little appetite for
limiting auditors’ liability, which reduced expectations that the US would back
UK moves.
Limiting liability was seen by many as one way of helping new entrants into
the audit market for big global clients.
It is reported that auditors will now campaign to have limited liability
agreements made mandatory, a move which could compel the US to except them.
