(1)

Directive 2006/43/EC of the European Parliament and of the Council of 17 May 2006 on statutory audits of annual accounts and consolidated accounts, amending Council Directives 78/660/EEC and 83/349/EEC and repealing Council Directive 84/253/EEC (1) establishes a minimum harmonisation of statutory audit requirements. Pursuant to Article 31 of that Directive, the Commission is to report on the impact of the national liability rules for the carrying out of statutory audits on European capital markets and on the insurance conditions for statutory auditors and audit firms and to make recommendations if it considers it appropriate.

(2)

Smooth functioning of capital markets requires sustainable audit capacity and a competitive market for audit services in which there is a sufficient choice of audit firms capable of conducting and willing to conduct statutory audits of companies the securities of which are admitted to trading on a regulated market of a Member State. However, increasing volatility in market capitalisation of companies has led to much higher liability risks, whilst access to insurance coverage against the risks associated with such audits has become increasingly limited.

(3)

Since unlimited joint and several liability may deter audit firms and networks from entering the international audit market for listed companies in the Community, there is little prospect of new audit networks emerging which are in a position to conduct statutory audits of such companies.

(4)

As a consequence, the liability of auditors and audit firms, including group auditors, carrying out statutory audits of listed companies should be limited. However, any limitation on liability is not justified in cases of intentional breach of professional duties on the part of an auditor and should not apply in such cases. Nor should such a limitation prejudice the right of any injured party to be fairly compensated.

(5)

In view of the considerable variations between civil liability systems in the Member States, it is appropriate at this stage that each Member State be able to choose the method of limitation which it considers to be the most suitable for its civil liability system.

(6)

Member States should accordingly be able to determine under national law a cap in respect of auditors’ liability. Alternatively Member States should be able to establish under national law a system of proportionate liability according to which statutory auditors and audit firms are liable only to the extent of their contribution to the damage caused, without being jointly and severally liable with other parties. In the Member States where any claims against statutory auditors might be brought only by the audited company and not by individual shareholders or any other third parties, Member State should also be able to allow the company, its shareholders and the auditor to determine the limitation of the auditor’s liability, subject to appropriate safeguards for investors in the company audited,