The biggest U.S. accounting firms, including Ernst & Young LLP and KPMG LLP, have been pressing Congress for more than a decade to protect them from liability lawsuits. Now they're taking matters into their own hands, drawing fire from government regulators and investors.
The firms are shielding themselves from financial damages over corporate scandals by requiring companies they audit to limit their right to sue. These waivers of punitive damages and jury-trial rights are tucked into audit contracts, often unnoticed by investors and corporate boards.
Five federal banking agencies say the provisions may lead to less rigorous audits, and are preparing to bar large banks from agreeing to them. Shareholders, including public-employee pension funds in Ohio and Florida, say the agreements may presage a push by the firms to curb investors' right to sue.
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