As I discuss in greater detail in this post on my Enforcement Action blog over at Compliance Week, on October 6 the U.S. Treasury Department’s Advisory Committee on the Auditing Profession issued its Final Report. Among many other things, the 200+ page report examined in great detail the “possible impact of the current U.S. liability system on audit effectiveness and the continued sustainability of the public company auditing profession.” The Committee, however, was “unable to reach a consensus as to whether limits on auditor liability would be beneficial or harmful to the capital markets and to investors or, for that matter, whether such limits are necessary to sustain the auditing profession,” and therefore presented no recommendation on this issue.
The Committee did present many interesting pieces of information that it gathered in considering this issue, including that the six largest auditing firms are currently defendants in ninety private actions related to audits of both public and private companies (either shareholder class actions or actions brought by companies or bankruptcy trustees) with damage claims against the auditors in each case in excess of $100 million. Forty-one of these ninety cases seek damages in excess of $500 million, twenty-seven cases seek damages in excess of $1 billion, and seven cases seek damages over $10 billion.
