Plans to cap the legal liabilities of big accounting firms when one of their audit clients goes bust are expected to be announced by the Government later this year.
Lobbying by Britain's big four accountants is understood to have paid off, and a ceiling of between £100 million and £200 million per case is likely to be set.
'We can insure against that,' said one senior partner with a big-four firm. 'What we cannot insure against is the present system of unlimited potential losses.'
The major firms – PriceWaterhouseCoopers, Ernst & Young, KPMG and Deloitte & Touche – fear that, as the economy turns down, they could face a repeat of the early Nineties when lawsuits against auditors hit £12 billion.
The law states that the so-called 'last man standing' – in this case, the auditors – can be made liable for the whole amount of any damages awarded.
News of what will be a major legal concession to accountancy comes as attempts to set up a new agency to police the profession face further delay.
The proposed Investigation and Discipline Board, which was supposed to start work in 1999, is now unlikely to be up and running before next year.
The five-year hold up was initially caused by wrangling over the shares of the IDB's running costs to be met by each of the professional bodies involved.
'Now the problem is that there is simply no scheme yet,' said one source. 'There are no proper rules as to how the IDB will operate.'
