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Companies Bill [Lords]

I did not intend to speak on this matter, but I have been moved to do so by the comments of the hon. Member for Putney (Justine Greening). She seemed very concerned about auditors, but I have a concern for those who rely on the audit report. It is not only the company that relies on that report: an audit report in a company’s accounts will be important to those who are thinking of investing in the company and those who have an interest in it—not least pensioners in the company. The hon. Member for Great Grimsby (Mr. Mitchell) highlighted the Maxwell situation, and the disasters that followed from that. The hon. Member for Cambridge (David Howarth) talked about civil negligence against auditors. I have been racking my brains, but I cannot think of any major cases where anyone successfully sued an auditor in such circumstances, although I think that there was an attempt in the Equitable Life case that failed. If an audit goes wrong, that can lead to very serious circumstances. What is proposed will not put an undue burden on auditors. The phrase we are talking about is ““knowingly or recklessly””. I am not an auditor: I was a fairly lowly solicitor before I entered this House. But in law there is a clear and well-established difference between carelessness and recklessness. Even in areas such as road traffic, we talk about careless driving and reckless driving. Recklessness is a very high burden for the prosecution to prove. I accept what the Minister said: the vast majority of auditors are honest, hard-working and do a good job. They have little to fear. The very small minority that for whatever reason—being too close to the company or for their own reasons—do not do the job to anything like the standard of a reasonable auditor are the only people who would have anything to fear. To add ““dishonestly or fraudulently”” would make it almost impossible for anyone to prosecute successfully. As the hon. Member for Cambridge said, it would have to proven that the auditor had in some way benefited from the fraudulent activity, which would be almost impossible to do. This is a sensible move. It means that auditors will have to think about the impact of an audit report outwith the company and adhere to proper standards. If they do not adhere to those standards, to the extent that it is reckless, it is right that there should be the option of a prosecution against them.