EC Recommends Limiting Auditors’ Liability

Excerpt from EuroWatch
published by WorldTrade Executive, Inc.

by Andrea Hamilton
McDermott Will & Emery

The European Commission has issued a Recommendation to limit auditors’ civil liability with the objective of promoting the market entry of auditing firms that would otherwise be deterred by the threat of unlimited liability.

By encouraging new market entries, the Commission hopes that its Recommendation will protect European capital markets by ensuring that sufficient auditing capacity exists to perform statutory audits of EU-listed companies. This Recommendation is based on a mandate contained in the 2006 Directive on Statutory Audit, and reportedly also on an increasing trend of litigation and issues concerning insurance coverage in the auditing sector.

Member States are free to decide on the appropriate method for limiting liability and set caps for liability if they wish.

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