Limited liability for KPMG
Sunday 01 October 1995
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.
- 1 PlayStation and Xbox hacked by Lizard Squad
- 2 Christmas comes early to Hong Kong, as millions of bank notes spill out onto busy street
- 3 The 'Black Museum': After 150 years, public set to see exhibits from police’s grisly crime museum
- 4 British actor Idris Elba cannot star as James Bond because he is black, says shock jock Rush Limbaugh
- 5 Vagina canoe artist defends herself over ‘obscenity’ charges
PlayStation and Xbox hacked by Lizard Squad
Antonio Martin shooting: Black teenager may have tried to ambush patrolman, says police officer's lawyer
Katie Hopkins speaks out on childhood obesity: 'Parents of fat children should be prosecuted for child cruelty'
Boxing Day snowfall set to push even more bargain-hunters online for sales
The 'Black Museum': After 150 years, public set to see exhibits from police’s grisly crime museum
British actor Idris Elba cannot star as James Bond because he is black, says shock jock Rush Limbaugh
Rozanne Duncan: Ukip expels councillor for 'jaw-dropping' comments made in BBC TV interview
Germany anti-Islam protests: 17,000 march on Dresden against 'Islamification of the West'
Ukip member gets into Christmas spirit with Union Flag plea to Santa 'for our country back'
BBC director Danny Cohen: Rising UK antisemitism makes me feel more uncomfortable than ever
Alex Salmond has 'broken his word to the Scottish people' says Scottish Lib Dem leader
iJobs Money & Business
Highly Competitive: Selby Jennings: Our client, a leading European Oil trading...
£43500 per annum + pension + holidays: The Jenrick Group: Night Shift Operatio...
£20000 - £25000 per annum + OTE £40,000 + Car + Pension: SThree: SThree are a ...
£20000 - £25000 per annum + OTE £35K: SThree: We consistently strive to be the...