that member states cap auditor liability according to a global
investor group whose members’ assets are estimated to be worth more
than $10 trillion.
In a letter to the EC, the International Corporate Governance
Network (ICGN) said it regrets the commission did not heed the
investment community’s opposition to a quantitative cap on auditor
The ICGN is concerned limiting auditor liability will reduce
audit firm accountability, provide a market incentive to take audit
shortcuts and reduce overall audit quality. The group supports
claims from the European insurance profession (see
International Accounting Bulletin issue 430) that such a cap
will not prevent catastrophic losses and will not improve the
availability of corresponding insurance coverage.
The EC proposals have been largely supported by the audit
“[The EC recommendation] if implemented, will protect the
community of auditors, particularly the larger ones, to the
detriment of other stakeholders and especially shareholders,” the
“In view of the additional protection of auditors that may
result, and of the crucial importance to financial market of the
development and stability of high-quality financial information, we
urge the commission to step up its efforts to ensure that the
market for audit services in Europe, especially to large listed
entities, becomes more competitive and more focused on audit
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The ICGN suggested the EC could emulate efforts in the US and UK
to study consolidation and competition in the audit market for
large public companies.