View all newsletters
Receive our newsletter - data, insights and analysis delivered to you
  1. News
September 14, 2008

Investor group calls for rethink on EU auditor liability stance

The EC should rethink its recommendation 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 liability.

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 profession.

“[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 ICGN wrote.

“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 quality.”

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.

NEWSLETTER Sign up Tick the boxes of the newsletters you would like to receive. A roundup of the latest news and analysis, sent every Wednesday.
I consent to GlobalData UK Limited collecting my details provided via this form in accordance with the Privacy Policy
SUBSCRIBED

THANK YOU

Thank you for subscribing to International Accounting Bulletin