IFAC Releases Position Paper on the Global Implications of Auditors' Legal Liability
The International Federation of Accountants has published the findings of a worldwide study on the ramifications of the legal liability crisis facing auditors. Auditors' Legal Liability in the Global Marketplace: A Case for Limitation identifies legal reforms designed to ease auditors' liability burdens and recommends solutions to balance auditors' accountability with others' in the audit process.
Forty-seven member organizations of the IFAC representing 36 countries responded to the survey. Most respondents said they were concerned about auditors' liability, even in countries where accountants are sued infrequently. Virtually all respondents said legal liability needed to be addressed on an international level.
John W. Gruner, director general of the IFAC, told the Journal the paper was intended to alert the profession to the scope of the liability problem and to some solutions. "There is no one solution because the legal system in each country is different," said Gruner. "We are trying to show accountants in countries that have an auditor liability problem that the cap some countries have on liability doesn't seem to have caused any problems."
The paper says that although there is unlimited auditor liability in only a handful of the developed countries, including Australia, Canada and the United States, the publicity garnered by large claims has resulted in public misconceptions of auditor responsibilities and has increased the likelihood of unwarranted claims in many other countries. …