Newsroom
Audit Firms Push (Again) for Liability Caps
by Tammy Whitehouse, Compliance Week (Subscription required for full article)
July 8, 2008
In an article on the CAQ and the public company auditing profession’s response to the Treasury Advisory Committee’s Draft Report and Addendum, Tammy Whitehouse reports, “Audit firms are making their case to the Treasury Department to provide public policy recommendations that would relieve what the audit firms describe as a risky, unfair exposure to legal damages.”
Quoting the CAQ’s comment letter submitted on June 27, 2008, Whitehouse writes, “The CAQ says ‘audit firms, for the sake of healthy capital markets, need litigation reform. The committee should use the data made available by the firms, including data regarding outstanding litigation claims, to supports its conclusion that the threat of catastrophic litigation risks is real and to recommend that policymakers and regulators act in response.’”
“We’re talking about striking a balance,” says Cindy Fornelli, executive director of the CAQ. She stresses that the center is perfectly content with holding individual auditors, or even audit firms, liable for clear cases of wrongdoing. But, she adds, “If you have a questionable audit, should it take out the entire firm? I would answer no. That’s not good for the marketplace.”
Bob Kueppers, deputy CEO of Deloitte & Touche and chairman of the executive committee at the CAQ, says audit firms are not trying to shirk their responsibility to do good audit work or shed excess costs. “It really is the catastrophic problem we’re trying to avoid,” he says. “Once we’re faced with a $1 billion or $5 billion judgment, there seem to be no solutions that would avoid failure of a major firm.”
