ICAI argues case for liability reform

The Institute of Chartered Accountants in Ireland (ICAI) has today published a position paper arguing the case for reform of the liability regime as it affects Irish auditors.

In the paper, entitled ‘Auditor Liability – the reform imperative’, ICAI makes the case that the current liability regime is unsustainable from a public/national interest perspective. The paper also argues that it is uniquely unfair to auditors.

Irish auditors are currently prevented from availing of the advantages of incorporation under Section 187 of the 1990 Companies Act. Section 200 of the 1963 Act debars auditors from entering into any arrangement with the company being audited to limit the auditors’ liability.

The ICAI contends that these statutes, when coupled with the principle of joint and several liability, mean that litigators are drawn to hold auditors responsible for company difficulties beyond the level which the auditor may have contributed.

The effect of Sections 187 and 200 also mean that each partner in an audit firm is placing his/her own personal assets at stake with each engagement even though s/he may not even be involved in the particular audit.

Commenting ICAI Director of Technical Policy, Aidan Lambe, said: "Obviously this is an area in which auditors want to see reform. The issues at stake are the subject of a consultation by the European Commission and were recently referred by Minister Micheal Ahern to the Company Law Review Group for consideration.

"The case ICAI is making today is that the currently audit liability regime is detrimental to the national interest which requires a vibrant and sustainable audit profession."