Proposals to limit the liability of auditors were last week introduced to Parliament by Department of Trade and Industry Minister, Jacqui Smith.
The measure was reportedly contained in a written parliamentary statement introducing the draft companies bill.
The statement revealed that if the legislation is passed, shareholders will be able to "agree a limit to the auditor's liability for damages incurred by a company, to such an amount that is determined by the courts to be just and equitable, having regard to the relative extent of responsibility of the auditor for the damage incurred".
However, the limiting of auditor liability will likely be balanced by the introduction of criminal penalties for auditors that "knowingly or recklessly" make incorrect statements.
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