Limited liability for KPMG

KPMG, Britain's second largest accountancy firm, is this week expected to announce that it will turn its audit operation from a partnership into a company in an attempt to protect itself against mounting negligence claims.

The pioneering move would place audit partners in a similar position to directors of limited liability companies rather than making them potentially liable for the total loss if the company collapses.

Accountancy watchers say it could trigger a rash of similar decisions at other accountancy practices and even other professional firms, such as solicitors and surveyors.

Coopers & Lybrand, Britain's largest accountancy firm, and other leading practices, such as Price Waterhouse and Ernst & Young, are known to be investigating the issue, though they are not as far advanced as KPMG. Law firms, which have started to encounter negligence claims of the scale that have been haunting accountants in recent years, are also beginning to consider the move.

KPMG, formerly known as KPMG Peat Marwick, says it has taken a lead on the issue because, since it audits about a fifth of Britain's public companies, it has a greater interest than most in protecting itself in this way. With audit and general accounting work taking up 200 of the firm's 600 partners and bringing in about pounds 200m of the pounds 600m total fee income, it is a "bigger chunk of our business than for anybody else", says senior partner Colin Sharman. KPMG has consistently maintained that it is not as exposed to lawsuits as some of its rivals, but it is estimated that the biggest firms have in recent years spent about 8 per cent of total revenues on costs associated with claims. The firms also suggest that the threat of personal bankruptcy is putting increasing numbers of people off becoming partners.

The incorporation plan is designed to offset this, but it only offers partial protection. Partners would no longer risk losing their homes, but they could still be sued personally and the firm wiped out.

Mr Sharman added that since the firm announced in June of last year that it was examining the change closely it has won widespread support from clients and gained approval from regulatory authorities such as the Department of Trade and Industry and the Bank of England.

However, within the profession, there is a view that limiting liability goes against current corporate-governance thinking, which holds that auditors are accountable to shareholders and should not therefore make deals with directors.

Acceptance of the plan would also lead to much greater disclosure of financial information about KPMG.

Suggested Topics
News
peoplePerformer had recently been diagnosed with prostate cancer
News
The surrealist comedian at the Q Awards in 2010
people
News
i100
Arts and Entertainment
Media baron Rupert Murdoch owns News Corps and 20th Century Fox
theatrePlaywright David Williamson is struggling to find a big name to star as the media mogul
PROMOTED VIDEO
News
ebooksAn unforgettable anthology of contemporary reportage
Life and Style
Six of the 76 Goats' cheese samples contained a significant amount of sheep's cheese
food + drink
News
i100
News
Russell Brand arriving for the book launch in East London
peopleRussell Brand cancels his book launch debate due to concerns about the make-up of the panel
Arts and Entertainment
JK Rowling will not be releasing a 'romance' novel anytime soon
books
Life and Style
tech

Of all the computers Apple has ever made there’s only one that Steve Jobs had to sell his car to finance

Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

SQL Developer with T-SQL, Watford, Hertfordshire - £350 - £360

£350 - £360 per day: Ashdown Group: SQL Developer with T-SQL, Watford, Hertfor...

IT Systems Business Analyst - Watford - £28k + bonus + benefits

£24000 - £28000 per annum + bonus & benefits: Ashdown Group: IT Business Syste...

Trainee Recruitment Consultant - Birmingham - Real Staffing

£18000 - £23000 per annum + Commission: SThree: The SThree group is a world le...

Trainee Recruitment Consultant Birmingham

£18000 - £23000 per annum + Comission: SThree: The SThree group is a world lea...

Day In a Page

How could three tourists have been battered within an inch of their lives by a burglar in a plush London hotel?

A crime that reveals London's dark heart

How could three tourists have been battered within an inch of their lives by a burglar in a plush London hotel?
Meet 'Porridge' and 'Vampire': Chinese state TV is offering advice for citizens picking a Western moniker

Lost in translation: Western monikers

Chinese state TV is offering advice for citizens picking a Western moniker. Simon Usborne, who met a 'Porridge' and a 'Vampire' while in China, can see the problem
Handy hacks that make life easier: New book reveals how to rid your inbox of spam, protect your passwords and amplify your iPhone

Handy hacks that make life easier

New book reveals how to rid your email inbox of spam, protect your passwords and amplify your iPhone with a loo-roll
KidZania lets children try their hands at being a firefighter, doctor or factory worker for the day

KidZania: It's a small world

The new 'educational entertainment experience' in London's Shepherd's Bush will allow children to try out the jobs that are usually undertaken by adults, including firefighter, doctor or factory worker
Renée Zellweger's real crime has been to age in an industry that prizes women's youth over humanity

'Renée Zellweger's real crime was to age'

The actress's altered appearance raised eyebrows at Elle's Women in Hollywood awards on Monday
From Cinderella to The Jungle Book, Disney plans live-action remakes of animated classics

Disney plans live-action remakes of animated classics

From Cinderella to The Jungle Book, Patrick Grafton-Green wonders if they can ever recapture the old magic
Thousands of teenagers to visit battlefields of the First World War in new Government scheme

Pupils to visit First World War battlefields

A new Government scheme aims to bring the the horrors of the conflict to life over the next five years
The 10 best smartphone accessories

Make the most of your mobile: 10 best smartphone accessories

Try these add-ons for everything from secret charging to making sure you never lose your keys again
Mario Balotelli substituted at half-time against Real Madrid: Was this shirt swapping the real reason?

Liverpool v Real Madrid

Mario Balotelli substituted at half-time. Was shirt swapping the real reason?
West Indies tour of India: Hurricane set to sweep Windies into the shadows

Hurricane set to sweep Windies into the shadows

Decision to pull out of India tour leaves the WICB fighting for its existence with an off-field storm building
Indiana serial killer? Man arrested for murdering teenage prostitute confesses to six other murders - and police fear there could be many more

A new American serial killer?

Police fear man arrested for murder of teen prostitute could be responsible for killing spree dating back 20 years
Sweetie, the fake 10-year-old girl designed to catch online predators, claims her first scalp

Sting to trap paedophiles may not carry weight in UK courts

Computer image of ‘Sweetie’ represented entrapment, experts say
Fukushima nuclear crisis: Evacuees still stuck in cramped emergency housing three years on - and may never return home

Return to Fukushima – a land they will never call home again

Evacuees still stuck in cramped emergency housing three years on from nuclear disaster
Wildlife Photographer of the Year: Intimate image of resting lions claims top prize

Wildlife Photographer of the Year

Intimate image of resting lions claims top prize
Online petitions: Sign here to change the world

Want to change the world? Just sign here

The proliferation of online petitions allows us to register our protests at the touch of a button. But do they change anything?