Calls for capping on auditor liability

News Article - 09 June 2009
Category: Business

European Union internal markets commissioner Charlie McCreevy has requested a cap on auditor liability to prevent the ruination of one of the big four companies.

In an interview with the Financial Times, former accountant Mr McCreevy expressed concerns that since the decline in auditor liability insurance, a large claim might now have the potential to cripple the industry.

"The market is restricted to the big four firms. There were six not so long ago. Consequently, a large claim may put an entire network at risk," he said.

In 1998, the six big firms became five after the merger of Pricewaterhouse and Coopers & Lybrand and then four in 2002 following the Enron scandal.

The four companies have repeatedly called upon the government to introduce caps to prevent damage. Such caps are currently in place in five European Union countries: Austria, Slovenia, Germany, Belgium and Greece.

In 2004, accountancy firms and the National Association of Pension Funds opposed proposals to introduce capping, saying that the measure would make it easier for companies to get out of situations where they have negligently examined financial figures.

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