In a speech held at the London Underwriting Centre on March 24, Commissioner Bolkestein made clear that he does not support any move to limit the liability of company auditors.
“In the current political climate” he said, “there would be little support for a regulatory intervention which would generally limit auditor liability.
After so many major financial reporting scandals and potential audit failures, regulators need to act to restore investor confidence.”
Mr Bolkestein pointed our four reasons why he does not believe limiting auditor liability to be a good idea:
Quality. If the auditor delivers permanently high quality he has no liability exposure.
Protection. Someone who has suffered damage should not have to shoulder the burden of suing separately all parties that have a partial responsibility for proper financial statements.
Self-created problems. There are two points here. First, the damage to the brand name of an audit company world-wide has increased through the branding of a local firm resulting from potential audit failures. Second, claims from potential audit failures have been settled too easily out of Court.
Public interest. Third parties should be able to rely on the correctness of companies' financial statements and be in a position to claim damages in the case of fraudulent financial reporting.
The Commission is currently preparing a Communication on audit priorities, which should be ready in mid-May. Furthermore, the forthcoming Action Plan on Company Law and Corporate Governance will set out a series of actions for the short and medium term. Many of the actions are aimed at clarifying the role and responsibility of those involved in managing and governing a company.
Full speech
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