Why wouldn’t clients seek terms that are in their best interest? Why wouldn’t they complain about onerous terms that gave them no recourse to the courts or to penalties for auditor negligence, aiding and abetting or malfeasance? Why wouldn’t they try to negotiate terms that fairly distributed the risk and liability according to the environment in which all were working?
Duh! Could it be because they have no choice?
Any move to limit the liability of auditors would be of benefit to the whole of London’s financial centre, according to KPMG’s UK chairman.
New legislation scheduled to come into force next month enables companies to implement agreements that would limit auditor liability, reports the Financial Times.
It is not yet clear how many companies will agree such deals with their auditors, but KPMG’s John Griffith-Jones insisted that the changes have the potential to benefit everyone.
He told the newspaper that although it may not be in the interest of individual companies to limit their auditor’s liability, there is less chance of the market having to deal with the chaos caused by the collapse of a major accountancy firm if they agree to do so.
“There is a feeling among some that we’re all doing well enough without this, but it is classic safety legislation that needs to be there,” added Mr Griffith-Jones.
In 2002 Arthur Andersen, then one of the world’s leading accountancy firms, effectively disappeared after becoming caught up in the fallout from the collapse of one of its audit clients Enron.