A hard road for auditors
The campaign to solve the liability problem looks like being a long one.
Wednesday 04 September 1996
Though it may not look that way to them at the moment, all this could be to the accountants' advantage in the long run. By having the issue fully aired and debated, a change to the law - if it comes - will look more like a reasoned response to a business difficulty than a cave-in to a bit of special pleading.
Even accountancy profession insiders now admit that the campaign got off to a bad start - all those claims about the amount of money lawsuits were costing them were never going to get very far so long as the firms would give only scant details about their financial situations. Then there was the breaking of ranks - with KPMG opting to cut its losses by incorporating the audit arm (and announcing full, company-style disclosure as a riposte to its critics) and PW and E&Y convincing Jersey of the wisdom of setting up a limited liability status. Touche Ross, meanwhile, has apparently sought competitive advantage in allying itself with the old ways and favouring neither of these options.
The Jersey parliament has passed the legislation in principle, and is now having to approve each part of the detail. Apparently, there are elements on the island that have cooled to the idea of big professional firms registering there in order to protect themselves from the calamitous effects of lawsuits.
This coolness is matched in certain corners of the mainland. It is proving difficult for the firms involved to convince people that they are not just fleeing to a tax haven. It is believed that unhappiness with "the smell of it" in the City and elsewhere is behind the intervention of the Deputy Prime Minister, Michael Heseltine, after the Law Commission's feasibility study for the Department of Trade and Industry had seemingly left the accountants with little hope.
It may also have something to do with the fact that various City bodies as well as industrial groups have added their voices to the clamour for reform. Last week, the Law Society - while backing the principle of joint and several liability - came out in favour of proportionate liability if both parties agreed to it.
As some senior accountants - who wish to remain nameless for fear of rocking the boat - now accept, the profession should have sought a wider campaign from the start.
Now, according to Roger Hughes, head of audit at PW, the firms are digging in for a long haul. He and his fellow audit chiefs are meeting at regular intervals to keep the campaign going.
Last week, two of their number addressed one of the regular meetings of the leading firms' senior partners to tell them of the current position. To judge from the fact that Graham Ward, a PW partner who is chairman of the Institute of Chartered Accountants' professional liability steering group, was also there, it seems that there is also likely to be closer co-operation between the two lobbying efforts.
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