and several other European member states in introducing a cap on
auditor liability, a move that an industry figure said could open
up the audit market for mid-tier firms.
After an extensive investigation, a proposal has been put before
the Swedish government recommending a cap of SEK100 million ($12.5
million) be put in place.
Dan Brännström, secretary general of Swedish professional
services institute FAR SRS, told The Accountant that if
the proposal is passed it could be an effective way to open up the
“It is high time to introduce limited liability for the Swedish
auditor. Today only very few audit firms have the capacity to audit
listed companies. The Big Four global audit firms dominate this
market segment in a number of countries and the existing liability
renders the growth of additional global audit firms more or less
impossible,” he said.
“It is important to have competition and choice in this market
but it will take time before you see the mid-tier firms become as
big as the Big Four firms.”
Brännström said the auditor liability issue was brought to the
attention of the Swedish government two years prior to the European
Commission’s recommendation in June this year that member states
consider limiting auditor liability.
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“With the backing of the big firms, the institute asked the
government to study how to limit auditor liability because of the
problems to get proper insurance for the auditors,” Brännström
“But Sweden’s decision was certainly helped along by the EC’s
recommendation in this field and it came at the right time,” he
Brännström said that the proposed SEK100 million cap is a large
amount. In Germany the limit for unlisted companies is €1 million
and for listed companies it is €4 million. But he noted that it is
better to have a large cap than none at all.
Grant Thornton Sweden chief executive Peter Bodin agreed the
current proposal is a good start.
“Of course if I had been asked I would have said it should have
been lower, perhaps at the levels they have in the German market,
which are good levels, but you have to start somewhere and this is
a good start,” he said.
The Swedish limitation proposal is a combination of a cap and
proportionate liability. Brännström said the proposal states the
board of directors has the primary responsibility for financial
“So if a bank or someone wants to make a claim, then they have
to address it to the board of directors first of all. Then the
board of directors can forward the claim to the auditor,”
Brännström added. “I think they chose that model because it is good
to have a cap solution as part of the complete solution. A cap is
very clear and it is easy for the stakeholders to understand and
Bodin said firms will have to invest in good quality people if
the market is to open more for the mid-tier, otherwise the
limitation of liability for auditors will make no difference.
“Grant Thornton Sweden has invested a lot to take market share
and of course this reform will help us to achieve that goal. I
think it is a positive change for us and the whole of the Swedish
market but we also have to build our capabilities,” he
If passed by parliament, the Swedish liability cap should come
in to effect in 2010.