The European Commission is ready to consider an EU-wide "cap" on the amount company auditors can be sued for, according to Brussels sources.

Internal Market Commissioner Charlie McCreevy, who will shortly launch a consultation on auditor liability, fears that a hefty lawsuit could sink one of the so-called Big Four - PricewaterhouseCoopers, KPMG, Ernst & Young and Deloitte.

This would greatly reduce choice for EU listed companies, the vast majority of which uses a Big Four firm.

Andersen, one of the former Big Five, collapsed in the wake of the Enron scandal.

Liability limitation through capping or proportionate liability could also lower the barriers to entering the market for smaller audit firms outside the Big Four, McCreevy believes.

Under proportionate liability, an auditor would only have to pay damages to the extent they were at fault in - for example - a company failure. Audit firms in the UK were given freedom to negotiate liability caps with individual clients through the recently enacted company law reform bill. It remains unclear how these will work in practice.

Most EU states have no limit on auditor liability, though six do already have a cap, including Germany and Belgium.

A study by consultancy London Economics found there are 16 claims outstanding against top accounting firms, each seeking £100m or more in damages. Five claimants are seeking more than £500m.

"If any one of those were to go wrong, it would certainly bring down the auditor," said Jeremy Jennings, chairman of the contact group which represents the Big Four.