Audit firms struggle to agree liability limitation agreements

29 May 2009

Sarah Wilson

EU regulation

Beale and Company solicitors have published research which has found that only 17% of 100 audit firms had managed to agree a contract with a client to limit their liability for damages. A report in Accountancy Age cited the research, which noted that the use of a liability limitation agreement ('LLA') was more prevalent among the larger audit firms. None of the firms that had signed an LLA with a client said their client had asked for a cut in fees in return.

In the same edition, Jon Moulton, head of private equity firm Alchemy, warns that there is a high chance of auditors facing law suits for their banking audits as investors looked for scapegoats after one of the most hostile financial periods in living memory. It reported that Moulton also warned that companies may be forced to accept LLAs because the big four’s audit domination means the market could not survive the loss of a major player if investors took legal action.

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