Federal Financial Regulatory Agencies Issue Interagency Advisory On External Auditor Limitation of Liability Provisions

GuidanceFederal Reserve Board (FRB)Risk Management

The federal financial regulatory agencies today announced the issuance of a final advisory that addresses safety and soundness concerns that may arise when financial institutions agree to limit their external auditors' liability. The agencies' primary concern is that limiting the liability of external auditors in engagement letters may reduce the reliability of audits. The Interagency Advisory on the Unsafe and Unsound Use of Limitation of Liability Provisions in External Audit Engagement Letters informs financial institutions that they should not enter into external audit engagement letters that incorporate unsafe and unsound limitation of liability provisions with respect to audits of financial statements and internal control over financial reporting.

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