In the UK on Tuesday, the Department of Trade and Industry continued to pursue its plan to limit the liability of auditing firms from lawsuits when audits they carry out do not prevent the collapse of companies. Legislation on the matter will go before Parliament in the autumn.

The goal in limiting liability when lawsuits are filed against auditors after the companies they have audited go bankrupt is to make sure that there remain enough auditing firms to ensure a competitive market. With unlimited liability, auditing firms have become the lawsuit target of choice after companies they have audited have no more resources due to bankruptcy or collapse.

Although auditing firms welcome this new limited financial liability, the trade-off is that they can now be held liable for criminal charges if their recklessness causes a company to fold.

Previously, they could only be called to account in the criminal courts for deliberate fraud or theft. The new rules on limiting liability of auditing firms does not put a specific cap on how much the firms can be sued for, but instead calls for proportionate liability according to the amount of blame for a company’s collapse that can be assigned to them.