The move, approved by a meeting of the organisation's council yesterday, follows last week's announcement by a committee representing the eight largest firms that it had already sent the Department of Trade and Industry a paper calling for a change to prevent at least one of them collapsing under the weight of lawsuits and a breakdown in the insurance system.
Graham Ward - a partner with Price Waterhouse, which itself faces an dollars 8bn writ over the collapse of Bank of Credit and Commerce International, who chaired the committee that put the proposal to the institute council - claims the ideas are widely supported in industry and the City and have even been given a sympathetic hearing by the Labour Party. But some members opposed the move because they feel it will open the institute to ridicule through representing self-interest and special pleading at a time when auditors have been widely criticised in the wake of company failures.
Like the big eight proposal, the institute advocates amending section 310 of the 1985 Companies Act to allow auditors to limit their liability through agreement with the client company.
This move, which would be subject to safeguards, would bring them into line with other professionals and providers of services. It is seen as an interim measure before abolition of the principle of joint and several liability, which accountants argue makes them unfairly liable for any loss when a company collapses.Reuse content