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Standards & GuidanceAuditor liability cap considered across EU
A consultation on the possibility of introducing a cap on auditor liability has been launched by the European Commission. Charlie McCreevy, internal market commissioner, said reform was being considered in response to an increasing trend of litigation against auditors and the threat to the market the collapse of a Big Four firm could present.
The Commission is inviting views on four possible options for liability reform: a fixed monetary cap at European level; a cap based on the size of the audited company; a cap based on a multiple of the audit fees; and the introduction of proportionate liability.
However, McCreevy warned there is probably no one-size-fits-all approach to cover the whole of the EU. The deadline for responses is 15 March.
Meanwhile, the Republic of Ireland ‘s Company Law Review Group (CLRG) is to examine auditor liability and whether firms should be permitted to limit their responsibility in the event of errors or fraud by themselves or their clients.
Michael Ahern, minister of state for trade and commerce, said he had asked the CLRG to consider whether the current system in Ireland is in need of reform; and that findings and appropriate recommendations be made to him over the coming months. The referral was prompted by the EU’s work in this area. Auditors are the only profession in Ireland that cannot limit their liability under domestic law.
Ahern said that the failure of an audit firm would reduce choice in the market, and “Ireland’s successful inward investment thrust … has not, and cannot, survive without a competitive auditing services infrastructure”.
LinksEuropean Commission Auditor Liability Consultation Michael Ahern, Minister of State for Trade and Commerce
February, 2007 |
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