ACCA Strategic Professional · Advanced Audit and Assurance (International) · Professional liability
Marlow Audit LLP is considering restructuring from a general partnership to a limited liability partnership (LLP) to manage its exposure. A partner states that this will protect the firm and all individuals from any claim. Which is the most accurate evaluation?
An LLP shields partners from personal liability for the negligence of other partners, but the firm remains liable to clients and a partner remains personally liable for their own negligent work. It is not a full protection from all claims.
- APartners are fully protected from all claims, including those arising from their own negligence
- BThe LLP removes the firm's liability to clients, but not the partners' personal liability
- CAn LLP protects partners from personal liability for other partners' negligence, but a partner remains personally liable for their own negligent workCorrect
- DAn LLP is only available to firms that hold professional indemnity insurance of at least the audit fee
Explanation
An LLP limits innocent partners' personal exposure to the firm's assets and their capital contribution for others' errors. The partner who performed negligent work, and the firm itself, can still be sued. Insurance is still advisable but not the condition described.
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