Accountancy firms and business organisations have welcomed the decision by the Minister of State for Trade and Commerce, Michael Ahern, to refer the current auditor liability regime to the Company Law Review Group for examination.
Currently, the auditing profession in Ireland is the only profession that cannot limit its liability under domestic law.
This, in addition to the legal principle of joint and several liability, leaves Irish auditors potentially accountable on a personal basis for losses not just arising from their own actions but also for those of others, such as company directors, who may be significantly responsible, but who do not have the resources to meet claims against them.
A recent EU report examined the impact of auditor liability regimes in member states.
With only four large global players in the audit market in Ireland, a single case taken against even one of these could have the capacity to bring down that firm and thereby reduce choice in the audit market, said the Minister, who warned that it could impact badly on the audit profession and the wider corporate sector.
"Ireland's successful inward investment thrust and thriving financial services sectors have not, and cannot, survive without a competitive auditing services infrastructure," the Minister said.
A move towards proportionate liability would simplify the existing law on liability and mean that, where more than one party was responsible for loss caused to a claimant, no single party could be held responsible for meeting the whole of the claim, the Association of Chartered Certified Accountants (ACCA) said.
"It is wrong that while many parties play a key role in the finance process, they can then back away whenever crisis hits, and leave the auditors to take the whole blame and risk. We must find a solution which is more equitable and properly shares responsibility," said Roger Acton, head of ACCA Ireland.
The Institute of Chartered Accountants in Ireland (ICAI) said that due to Ireland's success as a financial services and inward investment centre, auditor liability was an issue of national concern.
"At its extreme, this regime threatens the continued existence of even the largest audit firms and probably acts as a disincentive for other firms to enter the market," said ICAI president Martin Wilson.
The Minister also announced that the audit exemption threshold for companies has increased to €7.3 million, up from the previous level of €1.5 million, a move which was welcomed by business group Isme.
