Brussels, 24/03/2003 (Agence Europe) - The European Commission does not intend to propose restricting the liability of auditors, when it presents its communication mid-May, Frits Bolkestein pointed out on Monday. After the recent financial scandals, especially in the United States, the financial liability of audit firms was evoked before the courts for amounts that were disproportionate to the receipts of the companies, the Commissioner recalled during a conference in London. Nonetheless, he said, this liability should not be limited in European legislation. The Commission plans, on the contrary, to prepare a study on the economic impact of increasing auditor liability, an issue that also covers the audit firms' insurance regime.
According to Frits Bolkestein, there are four clear reasons for not limiting auditor liability: 1) unlimited auditor liability is a quality driver; 2) liability systems exist for the protection of the persons who suffered damage not for the convenience of those who may be at fault; 3) increased auditor liability is the result of growth of audit firms at world level, which means the branding of one local firm could potentially damage the whole network; and 4) audit is by its very nature a function which is carried out in the public interest and third parties should be able to rely on the correctness of statements.
Mr Bolkestein recalls that, in the 1998 Communication on statutory audit as well as in a January 2001 study on auditor liability, the Commission already noted that harmonisation of the audit liability system was not justified. In the first place, the large diversity of auditor civil liability systems in the various Member States is derived from the different fundamental structures of national legal regimes. Frits Bolkstein comments: "Differences in auditors' civil liability therefore derive from the basic features of national legal regimes. This is what makes harmonisation of auditor liability regimes very difficult". The January 2001 study noted that there are as many different regimes as Member States. Austria, Germany and Greece fixed an auditor threshold of liability. In Greece, for example, liability is limited to two years, but court action can be opened 20 years after the discovery of a fault, whereas, in Spain, liability lasts 15 years but can only be invoked in the year which follows discovery of the fault. Furthermore, Mr Bolkestein underlines, the audit market remains very compartmentalised and "the present regime on mutual recognition for auditors is only used about 25 times a year and this in spite of the fact that there are about 140,000 registered auditors in the EU". The May communication on audit will cover the updating of the 8th directive, the legal framework and the strengthening of auditors' independence, Mr Bolkestein said. The document will be presented at the same time as an action plan on corporate governance.