Further draft clauses on company law reform published
"ACCA supports the Government's proposal to enable companies and their auditors to agree to limit the liability of the latter to the former on a 'proportionate’ basis. Contracts entered into on such a basis would establish a fairer basis for determining an auditor’s liability for negligence since the new arrangements would implicitly provide for the responsibility of all parties involved in causing financial loss to shareholders to be taken into account by the courts.
While supporting the principle behind the proposal, it must be remembered that the whole audit process exists to protect the interests of the company’s shareholders. In view of this, it is vital that any initiative which would affect shareholders’ rights of redress where they have suffered loss be made subject to their explicit approval. The level of majority required to approve a liability limitation agreement will be a significant issue. And most importantly, it is essential that the two sides enter into a liability limitation agreement freely and without undue influence from either side. The Government should be prepared to monitor the working of the proposed reform and if necessary to introduce safeguards, statutory or otherwise, to ensure that both sides retain real discretion in the process of approval of any contract.
We are pleased to see that the government has listened to representations and has amended the proposed offence of knowingly or recklessly giving an 'incorrect' audit opinion. It now applies only to opinions which are 'misleading, false, or deceptive' which is much clearer and more workable for auditors."
He added: "We do not agree with those investors who have been claiming that the introduction of International Standards of Auditing is a retrograde step and a reason for doing nothing on audit liability. ACCA believes ISAs are high-quality standards and should be capable of being introduced by countries without insisting on additional requirements to meet national issues. This insertion of so-called "ISA-plusses" just complicates and detracts from the acceptance and implementation of common auditing standards, globally.