The Companies Act 2006 introduced provisions to enable auditors to limit their liability in respect of statutory audit work by entering into specific agreements with their clients
The new provisions contained in sections 534 to 538 of the act allow the validity of liability limitation agreements that purport to limit the amount of liability owed to a company by its auditor in respect of any negligence, default, breach of duty or breach of trust occurring in the course of the audit of accounts, of which the auditor may be guilty in relation to the company.
An agreement must fulfil be approved by a resolution of the company's shareholders and the arrangements must be fair and reasonable, having regard to the particular circumstances.
Furthermore, an agreement cannot cover more than one financial year and must expressly indicate the financial year in relation to which it applies.
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