It’s hardly surprising, really. In its infinite wisdom, the DTI gave the OFT all of three weeks in which to investigate, analyse and report. Less time than most sixth-formers get to produce a half-decent dissertation, in other words. The howls of outrage from the accountancy profession – the fee-earning side of the accountancy profession, that is, as opposed to the fee-paying side – were predictable, as were the factual errors and the points of misunderstanding. DTI under-minister Jacqui Smith was clearly teed up for a “big announcement” at July’s ICAEW annual conference, and so the idea of kicking the liability cap issue to the OFT was a great way of being seen to be doing something without having to take much responsibility for what came out – unless it suited one’s purposes.
It’s regrettable that the DTI insisted on pressing the OFT for such a quick report – bizarre, in fact, given that there’s hardly a vote to be won on this platform in next year’s general election and that the issue has been kicking around for the best part of a decade. Worse, the OFT was not invited to consider the eminently more sensible solution of proportionate liability, which at least has the virtue of not requiring auditors to pick up 100% of the tab when they may be much less than 100% to blame. (Keep it quiet, but we hear that sometimes even FDs are at fault for dodgy accounts!)
The resultant report is highly unsatisfactory and the DTI must find some excuse to require the OFT to re-examine the issue, take more time over it, consider the significance of proportionate liability and have a look at experience overseas in comparable jurisdictions such as Australia. The arguments need a better airing than the DTI allowed and the OFT could manage.
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