Pressure on Fair Trading chief to withdraw inaccurate audit report

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The Independent Online

John Vickers, the director general of Fair Trading, is to come under mounting pressure this week to withdraw a controversial report into audit liability after it was found to contain serious inaccuracies.

John Vickers, the director general of Fair Trading, is to come under mounting pressure this week to withdraw a controversial report into audit liability after it was found to contain serious inaccuracies.

Leading accountants are writing to Patricia Hewitt, the Secretary of State for Trade and Industry, to point out errors and omissions in the report into a potential cap on auditors liability, published late last month.

This follows a series of letters to Professor Vickers from leading accountants as well as insurance and legal experts concerned about the inaccuracy of the report. The Office of Fair Trading has said it is sticking by the assessment and is refusing to amend or withdraw it.

The report, which neither supports nor rejects the arguments for a cap on the amount of damages auditors would have to pay if they are sued, is angering the industry for a number of reasons.

It asserts that "professional indemnity insurance, despite recent cost increases, remains available and should become more affordable and extensive". Insurance experts, such as the brokers Aon, point out this is the opposite of the truth and for the large accounting firms it is impossible to obtain indemnity insurance from third parties.

The report also says the scope for the courts to award damages against auditors is limited. However, it ignores the successful case brought by security group ADT against Binder Hamlyn, and the Equitable Life action against Ernst & Young, for £2.5bn in damages.

Accounting firms want Ms Hewitt to back an amendment to the Companies Bill, which comes to the House of Commons for a second reading on 7 September, which would allow them to set liability caps.

"If the intellectual analysis went against us we might accept it, but they got so many of their facts wrong and failed to answer the questions put to them," said Neil Lerner, head of regulatory affairs at KPMG.

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