View from City Road: Auditors can afford to stand their ground
Wednesday 06 October 1993
But what looks right from the perspective of individual firms is wrong for the auditing industry. In 97 per cent of cases, auditors settle out of court, and it is more often than not under pressure from their insurers, who fear the unpredictability of legal costs in long trials and of the final awards by the courts.
There has been much talk of getting the Government to change the law so accountants would no longer bear liability for the whole of a loss suffered by a client, perhaps accompanied by a cap on damages that would be a multiple of audit fees. Miracles may happen, but in the meantime there is no substitute for good case law, if only more went to court.
The UK Caparo case narrowed the definition of an auditor's liability, proving that it is possible to make progress against an avalanche of claims by asking the courts to clarify the law. Abroad, Price Waterhouse has won a retrial of a dollars 338m award against it, in a US case brought by Standard Chartered. But actual US payouts last year totalled dollars 752m, 800 per cent up in two years.
Market forces may, however, force changes. Insurance cover is continuing to dry up. Mutual insurance is available through two schemes, Pail and Padua, but strains are said to be developing among member firms because of the sheer scale of claims.
If Price Waterhouse settles an dollars 8bn claim by the liquidators of BCCI in proportionately the same amount as the Dublin settlement, the cost would be more than dollars 600m. Soon, the big six firms may find it preferable to stand their ground more often. They would - in the end - benefit from a tougher stance. So would their clients: while auditing remains a legal requirement, insurance costs for professional negligence are merely passed on to the customer.
- 1 President of Argentina adopts Jewish godson to 'stop him turning into a werewolf'
- 2 Downfall of Dustin 'Screech' Diamond, the 'Saved By The Bell' star charged with bar stabbing
- 3 The 'Black Museum': After 150 years, public set to see exhibits from police’s grisly crime museum
- 5 Sir Winston Churchill’s family begged him not to convert to Islam, letter reveals
President of Argentina adopts Jewish godson to 'stop him turning into a werewolf'
Downfall of Dustin 'Screech' Diamond, the 'Saved By The Bell' star charged with bar stabbing
Syrian teenager Usaid Barho reveals how he escaped from Isis using a suicide vest
Sir Winston Churchill’s family begged him not to convert to Islam, letter reveals
UK weather: 'Coldest night of the year' tonight as freezing temperatures plummet to -10C
Millions of Britons struggling to feed themselves and facing malnourishment
British actor Idris Elba cannot star as James Bond because he is black, says shock jock Rush Limbaugh
Ukip member gets into Christmas spirit with Union Flag plea to Santa 'for our country back'
Germany anti-Islam protests: 17,000 march on Dresden against 'Islamification of the West'
Nigel Farage: Ukip leader named 'Briton of the year' by The Times
Douglas Carswell tells Ukip to stop blaming foreigners as youth poll shows Nigel Farage is even less popular than Nick Clegg
iJobs Money & Business
Not specified: Selby Jennings: VP/SVP Credit Quant Top tier investment bank i...
Not specified: Selby Jennings: Quantitative Research | Global Equity | New Yor...
Not specified: Selby Jennings: SVP Model Validation This top tiered investment...
Highly Competitive: Selby Jennings: Our client, a leading European Oil trading...