The long-term implications of the collapse of Equitable Life's action against auditors Ernst & Young are only just surfacing. It is beginning to look as though the court debacle could not have come at a better time for those in favour of reforming auditor liability.
It has taken a long time to reach this point - the arguments have been running for 20 years. But one of the deterrents to any definite resolution has always been the feeling that none of the many cases against audit firms have been allowed to run their course. They have almost always been pulled at a fairly early stage as insurers and lawyers got together and negotiated a way out of the impasse to avoid an even greater haemorrhage of costs.
As a result, the public perception that auditors are always to blame for corporate disasters has been allowed to grow. It has become a circular process. "People think auditors are liable as the prime safeguard against commercial misfortune, simply because they read of them being sued all the time," says Clare Canning, head of commercial litigation at Barlow Lyde Gilbert, who led the defence team in the Equitable Life case.
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