The big four accountancy firms should be able to limit their liability for negligent audit work to £500m, said commercial law firm Reynolds Porter Chamberlain (RPC).
It said it had submitted a proposal to the Department of Trade and Industry’s (DTI) consultation in Director and Audit Liability. A liability limit was one of the proposals for reform mooted in the consultation document.
The company also said that the suggested lower cap of £100m would be justified for the second tier of audit firms, which could be determined by the company’s turnover or profitability.
By having relatively high caps on auditor liability there would be no loss of incentive to conduct quality audits, said RPC. At the same time, claims for sums below the caps would not threaten the continued existence of those firms.
RPC Partner Jane Howard said: “The Big 4 audit firms can obtain insurance in the market which, combined with their captive insurance vehicles would allow them to meet a claim below £500m without sending them out of business and further reducing competition in the audit market.
The law firm said audit firms should be allowed to forego the liability cap if they wanted to offer their clients higher levels of PI cover.
