UK's OFT Refuses To Cap Legal Exposure For Accountants

by Robin Pilgrim, LawAndTax-News.com, London

04 August 2004

The UK's Office of Fair Trading has angered the so-called 'Big Four' accounting firms by refusing to consider capping their legal liability in relation to audit activity, it has emerged.

The Department of Trade and Industry (DTI) had asked the OFT to examine the possibility of limiting auditor liability in order to prevent another spectacular collapse such as that of former leading audit and accounting firm Arthur Andersen.

The Big Four (Ernst & Young, Deloitte and Touche, PricewaterhouseCoopers and KPMG) have reportedly threatened to stop auditing FTSE 100 companies until the OFT reconsiders its stance, but the Office has responded by suggesting that:

"The combined direct and indirect value of the audit market for listed firms suggests that Big Four auditors will not easily relinquish their established position."

According to a report in the Times Online this week, the accounting firms have hit back, arguing that the OFT has misjudged their ability to secure insurance against audit-related claims, and have revealed that premiums for such cover have increased by more than 300% in recent years.

"There is no fee increase that gets us to a position that mitigates the risk because we can't get any insurance," head of professional affairs for PricewaterhouseCoopers, Peter Wyman told the newspaper on Tuesday.

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