Accountants hold last-ditch talks with Government

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The Independent Online

The Department of Trade and Industry is today preparing a statement designed to head off a rebellion by the country's top accountancy firms that could result in the accounts of major companies not being audited.

The Department of Trade and Industry is today preparing a statement designed to head off a rebellion by the country's top accountancy firms that could result in the accounts of major companies not being audited.

The statement will not be finalised until after Patricia Hewitt, the Secretary of State for Trade and Industry, has met leading representatives of the accountancy profession today. That meeting is being attended by Peter Wyman of PricewaterhouseCoopers, the chairmen of KPMG and Deloitte & Touche, the managing partner of Robson Rhodes, to voice the concerns of smaller firms, and the head of the Institute of Chartered Accountants.

At the heart of the problem is auditors' vulnerability to lawsuits from people or businesses claiming to have been wronged by companies whose accounts they audit. The accountants have told the Government that unless their liability is capped they will not touch the books of companies they regard as high-risk.

Mr Wyman said: "We do this already in a small way, if we don't have confidence in the management or the prospects for the company. But we would have to treat a wider range of companies as risky propositions. There are some companies that are highly geared in financial areas that are known to be high-risk. We face potential catastrophe, which could wipe us out, which we cannot insure against."

Arthur Andersen, formerly a major accountancy group, was effectively put out of business two years ago by the collapse of Enron, the Texan energy trader. Other high-profile collapses such as WorldCom also gave the auditing profession a bad name, and there are concerns about the repercussions of Shell's overstatement of its oil reserves.

The accountants are asking the Government to remove legislation that prevents them from limiting their liability. They would prefer an amendment to the Companies Bill, or at least have a clause inserted into the next Companies Bill, which is due to be published next year.

At the least, the accountants want to see the principle of proportionate liability introduced, under which they would have to pay compensation only in proportion to their contribution to a failure. "We are quite willing to pay for our own mistakes," a KPMG spokesman said, "but we don't want to pay for other people's."

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