Brussels, 27/10/2006 (Agence Europe) - The risk of bankruptcy among large audit firms has prompted Charlie Mc Creevy to envisage setting limits to their responsibility in case of ruinous legal proceedings against them. The level of damages and interests that may be claimed from the legal auditor by investors or companies that have fallen victim to a firm's malpractice should have a ceiling set on them, as ensuing proceedings can be costly and endanger a whole network, the Internal Market Commissioner said in an interview with The Financial Times on Friday. The example of the disappearance, in 2002, of the Arthur Andersen firm, involved in the Enron scandal, makes one fear that history will repeat itself and result in a further reduction in the number of large accounting firms. Today there are four such firms, the “Big Four” (KPMG, Ernst & Young, Price Waterhouse Cooper and Deloitte). “Personally, I think we should set a limit”, the Commissioner went on to say. He will be presenting a working document on the subject to the College by the end of the year.
Early October, the Commission had published an independent study by London Economics that highlighted a number of risks such as excessive concentration of the sector, the low level of liability insurance for auditors, and the serious impact that the possible failing of a corporate audit network could have on financial markets (EUROPE 9281). The study was in favour of restricting auditor responsibility in order to reduce such risks, but did not recommend acting in a harmonised manner at European level. (ab)