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.
Why are you making commenting on The Herald only available to subscribers?
It should have been a safe space for informed debate, somewhere for readers to discuss issues around the biggest stories of the day, but all too often the below the line comments on most websites have become bogged down by off-topic discussions and abuse.
heraldscotland.com is tackling this problem by allowing only subscribers to comment.
We are doing this to improve the experience for our loyal readers and we believe it will reduce the ability of trolls and troublemakers, who occasionally find their way onto our site, to abuse our journalists and readers. We also hope it will help the comments section fulfil its promise as a part of Scotland's conversation with itself.
We are lucky at The Herald. We are read by an informed, educated readership who can add their knowledge and insights to our stories.
That is invaluable.
We are making the subscriber-only change to support our valued readers, who tell us they don't want the site cluttered up with irrelevant comments, untruths and abuse.
In the past, the journalist’s job was to collect and distribute information to the audience. Technology means that readers can shape a discussion. We look forward to hearing from you on heraldscotland.com
Comments & Moderation
Readers’ comments: You are personally liable for the content of any comments you upload to this website, so please act responsibly. We do not pre-moderate or monitor readers’ comments appearing on our websites, but we do post-moderate in response to complaints we receive or otherwise when a potential problem comes to our attention. You can make a complaint by using the ‘report this post’ link . We may then apply our discretion under the user terms to amend or delete comments.
Post moderation is undertaken full-time 9am-6pm on weekdays, and on a part-time basis outwith those hours.
Read the rules hereComments are closed on this article