Written answers

Wednesday, 31 January 2007

Department of Enterprise, Trade and Employment

Auditors' Liability Regimes

8:00 am

Photo of Pat RabbittePat Rabbitte (Dublin South West, Labour)
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Question 202: To ask the Minister for Enterprise, Trade and Employment the terms of reference given to the Company Law Review Group for their investigation into the report from the EU Commission entitled Study on the Economic Impact of Auditors' Liability Regimes, as referred to in the statement of 3 January 2006; and if he will make a statement on the matter. [2521/07]

Photo of Michael AhernMichael Ahern (Cork East, Fianna Fail)
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In the context of the 8th Directive on Auditing, the EU Commission arranged for a study on the economic impact of current EU rules on auditors' liability regimes and on insurance conditions in Member States. This study entitled "Study on the Economic Impact of Auditors' Liability Regimes" was published late last year, and describes the existing limitations in the insurance market for international audits, examines the economic needs for limited auditors' liability and compares several possible methods for limiting liability.

Given the debate which has been launched by the EU study, I requested the Company Law Review Group (CLRG) to examine the matter, in addition to the Limited Liability Partnership strand of his existing remit to the CLRG in relation to its 2006/07 Work Programme.

I requested that the CLRG examination of the issue of auditor liability include the following:

To develop an understanding of the issues associated with the current regime of auditor liability in Ireland;

To consider whether the current regime is in need of reform having regard to the policy issues and other considerations that are relevant, including those concerning the continuity of supply of audit services to the Irish economy;

In the event that the view of the CLRG is that reform to the present system is warranted, to identify the areas in which it is considered reform is required, and the means by which this might best be achieved including the development of proposals in the matter. In particular, potential remedies as to how such reform could be achieved, including but not limited to, changes in the law

for the introduction of statutory liability caps;

to permit limitation of liability by contract;

to introduce a regime of proportionate liability;

to permit auditors to incorporate;

should be explored, though not to the exclusion of other possible solutions.

I have requested that the CLRG examine these issues, report its findings and make appropriate recommendations to him in the light of its work over the coming months.

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