Desperately seeking limited liability

Article Abstract:

Auditors always run the risk of litigation arising from incorrect opinion. However, while the threat of punishment by litigation may be widely accepted as an occupational hazard, UK practitioners face the problem of excessive punishment. The level of litigation involving auditors often greatly surpass their professional obligations. An overly litigious environment poses a serious threat to the auditing industry since it is highly possible for a major auditing firm to collapse due to litigation pressure. The financial impact of such a collapse could, in turn, undermine London's status as a leading financial center. The challenge for the industry now is to find a way to limit auditors' liability without adversely affecting audit quality. Several strategies have been employed, including limiting who can sue, limiting the size of the claim and forming limited liability subsidiaries. The most acceptable solution so far is apportionment of damages.

Management, Limited liability

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Small, but perfectly profitable

Article Abstract:

The British accounting industry is being transformed by the increasing competitiveness of small niche firms. While smaller accounting practices are not competing for large corporation contracts, they are going head-to-head with the country's leading accounting firms (Big Five) in areas where their expertise overlap. Niche firms, established usually by accounting professionals who have left Big Five firms, believe that they have a chance of taking market share away from their larger rivals. Rees Pollock founding partner Simon Rees, for instance, is convinced that his firm gained the business of the UK Dept of Trade and Industry because of its expertise, lower fees and absence of conflicts of interests. Aside from price, niche players are also capitalizing on their greater flexibility to gain new clients.

United Kingdom, Services, Small business, Accounting firms, Accounting services

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Directors beware? Auditors rejoice?

Article Abstract:

The common law duty to govern imposed on directors of corporations in the UK does not require very high standards of competence. However, this may soon change if a court decision in Australia is adopted in Britain. In 'AWA v. Daniels and Others,' the New South Wales Court held AWA corporate officers liable for the losses incurred by the company. The case involved an electrical products manufacturer that incurred huge losses through the actions of its foreign exchange manager. AWA sued its auditors for failing to detect the losses. The auditors countered that AWA's CEO, senior executives and non-executive directors were the ones who were negligent since they ignored warning signals as well as expert advice on setting up a foreign exchange department.

Cases, Corporate directors, Corporate governance, Negligence, Chief executive officers

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