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Title: Limiting auditors' liability in Malta : a study
Authors: Muscat, Jean Paul
Keywords: Business enterprises -- Malta
Auditing -- Malta
Quality control -- Malta
Risk management -- Malta
Issue Date: 2009
Abstract: The main objective of this study is to evaluate the applicability of the proposals put forward by the European Commission Recommendation concerning the limitation of the civil liability of statutory auditors and audit firms within the Maltese audit market. The study e-mailed questionnaires responded by 36 participants from the selected populations, comprising audit firms, listed companies, banks and insurances. These where supported by 12 interviews carried out with the questionnaire respondents. Findings were then presented and discussed. According to the results of this study, liability risks will significantly vary with the client portfolio of each individual audit firm and this emphasised the difference in risk exposure between audit firms of different sizes. It was also established that auditors' unlimited civil liability is not a strong driver to audit quality as this is mainly determined by other factors. Furthermore, the availability of adequate indemnity insurance does not seem to be a problem concerning Maltese audit firms. It also emanated that any initiative in favour of limiting auditors' liability would not help improve competition in the market for statutory audits of listed and large unlisted companies as other market barriers clearly exist. Auditors' civil liability does not have a significant role on investor confidence which is more likely to be influenced by other factors. There is a preference towards a limitation based on the concept of proportionality which is very similar to the liability provisions of Maltese law. The study concluded that although Maltese audit firms are not immune from liability risks, the extension of provisions currently limiting auditor liability in Malta is not justifiable given the current state of affairs. This study is addressed to the legislators responsible to evaluate the European Commission Recommendation concerning the limitation of auditors' liability. This study should be of contribution in evaluating the alternatives being proposed and in determining the actions to be taken in light of the Recommendation. Amongst its major recommendations, the study also proposes the amendment of the Accountancy Profession Act to clarify auditors' responsibility and liability towards damaged parties.
Description: B.ACCTY.(HONS)
Appears in Collections:Dissertations - FacEma - 2009
Dissertations - FacEMAAcc - 2009

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