We have talked many times how Sarbanes-Oxley has turned into an El Dorado for accountants. We've explored that here and here and here and here.
Not content with that, the Big Four are now moving closer to getting their liability caps, according to news reports. The group looking at the competitiveness of U.S. financial markets, with backing of Treasury Secretary Hank Paulson, is expected to recommend soon that beancounters get some protection.
Not content with making huge money, the bean counters have been pushing for some time to get the kind of cover from the Government. That would help them hang on to the moolah and stop them getting sued when they do a bad audit.
Waivers of punitive damages and jury-trial rights have been finding their way into Big Four audit contracts – and have come under fire from watchdogs who feel that liability caps will make accountants less vigilant.
And in September, the case for liability caps gained some momentum with a well-timed study in Europe warning that an Arthur Andersen style action against the likes of KPMG, Ernst & Young, PwC or Deloitte could damage the wider economy. It's something that I explored in this blog entry.
So it looks like liability caps for auditors are going to be enshrined in law. And that's a worry. It's a change that might be in the interests of accountants, but definitely not in the interests of shareholders and the broader public.
To accounting firms about liability caps:
Just do your work effectively and competently and you won’t get sued and have to worry about paying for your blunders.
Your attempt to get liability caps hurts your credibility in that you expect to foul up and hope not pay for it.