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Hutton hails guidance on auditor liability agreements

Hutton hails guidance on auditor liability agreements

DEPARTMENT FOR BUSINESS, ENTERPRISE AND REGULATORY REFORM News Release (2008/133) issued by The Government News Network on 1 July 2008

Business Secretary John Hutton has welcomed new guidance on the use of auditor liability limitation agreements, published today by the Financial Reporting Council.

Auditors have been able to agree limitation of their liability to the companies they audit since 6th April 2008, when the third phase of the Companies Act 2006 came into force.

Mr Hutton said: "Today's guidance from the Financial Reporting Council will boost understanding of this new area of the law, and its potential contribution to greater stability and certainty in the business world is very welcome and timely.

"It is for companies and shareholders to decide for themselves whether to make liability limitation agreements with their auditors, but this guidance will make that decision easier.

"I would like to thank the working group brought together by the Financial Reporting Council for their hard work on this guidance."

The guidance explains the processes companies should follow in making a liability limitation agreement with their auditors, as well as the factors to assess in deciding whether it is appropriate for them.

Notes for Editors:

1. For further information on the Companies Act 2006, visit http://www.berr.gov.uk/bbf/co-act-2006/index.html

2. Under Sections 532 to 538 of the Companies Act 2006, implemented on 6th April 2008, auditors can negotiate with companies to limit their liability to an amount that is fair and reasonable. A separate agreement is required for each year's audit, and in most cases each agreement must be approved by the company's shareholders.

3. The Department for Business Enterprise and Regulatory Reform helps UK business succeed in an increasingly competitive world. It promotes business growth and a strong enterprise economy, leads the better regulation agenda and champions free and fair markets. It is the shareholder in a number of Government-owned assets and it works to secure, clean and competitively priced energy supplies
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