If you are interested in seeing what the future may hold, take a gander at what's happening in the United Kingdom. Nick Land, UK chairman of Ernst & Young, is urging the adoption of legislation that would limit the liability exposure for auditors.

This move should come at no surprise as E&Y is being sued by Equitable Life for £2.6 billion. That's $4.32 billion at the current rate of conversion.

Land's argument is very simple. He sees the exposure to massive damage claims that might lead to elimination of one or more of the Big Four. E&Y has also modified its pension plan for some of its employees in response to a growing deficit in its funding.

In another development in the U.K., it has been reported that Pricewaterhouse Coopers is generally unwilling to take on any new audit clients unless they also receive non-audit work from them. The PCAOB would probably have a field day with that.

The Big Four firms in the U.K. (or at least two of them) are obvious getting pretty nervous. Although they probably believe they will be able to defend successfully any lawsuits brought against them, there appears to be serious concern. I get the impression that they expect a large number of lawsuits as long as there is no limit on an auditor's liability. There also appears to be an impact on the revenue of these firms.

It is interesting to see that problems for auditors are not just limited to the U.S. I predict that you will witness even more stories in the next few months focusing on the problems for auditors in other countries.

Clearly, there is a lot of talk about the limited number of accounting firms that audit public companies. The problem is that increased regulation, liability exposure, and a reduction in firms' revenue and profits is resulting in even fewer firms acting as auditors of public companies.

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