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Member, Beacon International Group, Ltd.
LONDON--The United Kingdom's Department of Trade and Industry announced yesterday that it would not recommend introducing a cap on auditors' liability.
Auditors had been campaigning for a cap to be introduced because of concerns over the price and availability of insurance coverage.
Last month, the U.K.'s Office of Fair Trading issued a report stating that it found that the introduction of a cap on auditors' liability would have no effect on competition in the audit market.
In July, Trade and Industry Secretary Patricia Hewitt said that the law would be amended to allow a liability cap only if the OFT concluded that such a change would increase competition.
In a submission to Parliament Tuesday, Ms. Hewitt said that, in the light of consultation with interested parties "and the OFT's advice that introducing a cap would not significantly enhance competition, I have concluded against proposing changes to the law on this."
But Ms. Hewitt said that she would put forward amendments to a Companies (Audit Investigations and Community Enterprise) Bill currently being considered by Parliament.
Among those changes, she said, would be a proposal to allow, but not require, audit companies to indemnify their directors for the legal and financial costs of court proceedings brought by third parties, except in the case of legal costs for unsuccessful defenses in criminal cases or fines and penalties levied by regulators.
Ms. Hewitt said that the government would also consider whether limiting liability on a proportionate basis, contract by contract, would enhance competition and improve quality in the audit market.