UK to limit liability for audit firms as a result of Enron, but US declines to do so

The UK is limiting its liability for audit firms because of
Enron, but the US does not want to do the same, arguably for the same reason.

The UK has won the battle in persuading government that
allowing auditor liability arrangements will serve the greater good in securing
a vital part of the profession which serves UK plc.

But it was a battle fought long and hard, mired with mistrust
of whether firms were exaggerating the risk, as well as outright annoyance that
the profession needed protecting in the first place.

In the UK, the good sense that prevailed over limiting
liability had much to do with the transparent approach of the UK firms, who went
out of their way after the Enron collapse to exhibit by way of
their financial statements the extent of the risk they faced in the event of
similar litigation.

Financial Reporting Council Chairman Paul Boyle said UK firms
generally had higher levels of transparency than their US counterparts, which
contributed to securing more support for limiting their liability. He suggested
that US firms reconsider
their stance.

One of the points they are arguing is that firms should not
publish their financial statements. There is a link here, which they might want
to think about, between them not wanting to publish these state-ments and the
lack of support for limiting liability.

The US firms may want to stick to private reports for now.

But if they want their proposals for limiting auditor
liability to be taken seriously, they should equally consider providing the
proof of the risk that they claim to face.

And if the risk is as serious as they say it is, it should
not be too hard to prove.

(Source : Internet, 12-9-2008)