Alarm at decisions on auditors' insurance

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The Independent Online
SHAREHOLDER groups including the Association of British Insurers are opposing moves by companies that will enable them to buy professional indemnity cover for their own auditors, writes John Willcock.

The move conjures up the prospect of shareholders buying indemnity cover for auditors whom they may sue for negligence. Vaux Group, the brewer, altered its articles of association in January to enable it to buy such cover for its auditors, Price Waterhouse. Vaux stressed that it had no immediate plans to use the powers.

The move comes as costs for professional indemnity cover have rocketed because of huge negligence claims, often brought by shareholders. Unilever and Rugby Group plan to pass similar resolutions at their annual meetings on 4 and 6 May, with more companies in the pipeline.

Richard Regan, head of investment affairs at the ABI, said: 'It is desirable that companies should offer PI cover for their directors and officers, but it must be appropriate that the auditors provide their own.'

Stuart Bell, research director with PIRC, a consultancy advising local authority pension funds, said: 'If auditors are to be indemnified by companies they may exercise less care, be less rigorous, and be less independent when examining the directors' accounts.'

A spokesman for Unilever insisted the proposed amendment is was nothing out of the ordinary. 'We believe it is good management to have the utmost flexibility under our statutes.'

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