This spring, my wife and I plan to add an extension on to our house. Without boring you with all the construction minutiae, it basically will include an expansion of the kitchen and adding a family room -- complete with a La-Z-Boy for yours truly and the requisite plasma screen TV.
In previous columns, I've revealed my ineptitude with all things handy, so in the interest of preventing a man-made disaster, we're currently in the process of interviewing contractor candidates to oversee the job.
But imagine a scenario like this.
A potential contractor bids out the job, shows me his credentials and past references, and then shoves a disclaimer in my face, saying, in essence that if they screw up, my litigation options be severely curtailed.
So if a myopic worker with Laurel & Hardy Builders inadvertently hacksaws through the septic pipe and turns my basement into a cesspool, I would be somewhat hamstrung in my legal options if I signed the waiver.
Interestingly, something similar is rippling through the accounting profession. Many of the Big Four and national firms, in an attempt to shield themselves from liability as a result of major corporate scandals at audit clients, are requiring clients to sign waivers of punitive damages along with the engagement contracts limiting their right to sue.
Following roughly 10-plus years of lobbying lawmakers without much success on the topic of capping audit liability, many firms more or less have taken the lead.
Three months ago, Silicon Valley stalwart Sun Microsystems disclosed that its engagement contract with Big Four firm Ernst & Young required it to submit any and all audit disputes to an arbitrator and relinquish its rights to punitive damages.
Now, proponents of tort reform -- and generally I consider myself to be among that demographic -- would no doubt harbor a different opinion on this trend, from say, a former shareholder of Enron or WorldCom.
Some have stated that an unwanted trickle-down effect of capping auditor liability would be less thorough audits, while others have opined that liability provisions for auditors would usher in similar caps on potential shareholder suits.
Already, federal banking agencies are girding to bar member banks from complying with auditor waivers.
In covering various industries for two decades, I have certainly written on my share of absurd lawsuits -- like the dimwitted woman from New Mexico who, while driving, inexplicably placed a cup of hot coffee between her legs, with predictable results, and successfully sued the vendor.
But this is another matter entirely.
Capping audit liability -- which, to no one's surprise also has morphed into a huge debate in Europe -- is another in what seems to be a growing roster of issues that could conceivably alter the landscape of the profession in the foreseeable future, and therefore needs be watched.
Very closely.
