Liability, insurance and settlements
Deloitte’s response to the Competition Commission's working paper
The Working Paper sets out the factual position relating to the types of liability to which auditors may be exposed, the extent to which statute may enable such liability to be limited, and the insurance arrangements of the top tier and mid tier audit firms.
Insofar as Deloitte can interpret the content with the commercially sensitive information redacted, it agrees with the majority of the factual content in the Working Paper.
Whilst not explicitly stated, the implication of the Working Paper is that liability, insurance and settlement costs do not act to restrict entry; Deloitte agrees with this view.
However, Deloitte does not agree with the statement that the risks faced by audit firms in relation to professional negligence may be regarded as low. Rather, it is a very high inherent risk, which firms then mitigate to a level that they and their stakeholders (including regulators) consider to be acceptable. These steps reduce the likelihood of claims arising, rather than reducing the existence of a high risk environment