The Big Four audit firms in the United Kingdom are worried that they could be facing huge payouts for negligence claims in the wake of the financial crisis and even the potential collapse of some firms.

The U.K. member firms of Deloitte, Ernst & Young, KPMG and PricewaterhouseCoopers have been pushing for a cap on payouts from negligence lawsuits, but did not receive the legal change they wanted from the U.K. government. They had been making their case to Business Secretary Lord Mandelson and the Department for Business, Innovation and Skills, according to Times Online.

Under current law, the audit firms can be held liable for the entire amount of losses when one of their business clients suffers a financial collapse, even if they’re only partially at fault. The firms are worried that lawsuits arising from audits of the Madoff feeder funds and companies like New Century Financial could even bankrupt them.

While Lord Mandelson is reportedly sympathetic to their concerns, his department apparently already considers a recent legal change to be enough of a help to the firms. The 2006 Companies Act gives company directors the ability to limit the liability of auditors if they get the approval of shareholders. However, this law does not go far enough from the audit firms’ perspective as no major companies to date have been willing to limit their audit firms’ liability.

That’s for good reason. In some cases, the collapsed companies have reconstituted and turned around and sued the audit firms in order to recover some money to refill the corporate coffers, as in the case of Parmalat, which recently lost a ruling that went in favor of its old audit firm Grant Thornton.

Another stumbling block is the U.S. Securities and Exchange Commission, which opposes the liability caps. The SEC is worried that corporate directors and their outside audit firms could cut backroom deals to limit negligence claims in exchange for going easy on auditing the company’s financial statements. The SEC could even force British companies to remove the caps if they have operations in the U.S.

A senior PwC partner quoted by the Times decried the influence that the U.S. agency was having on the U.K. government, but that’s the way it goes in the global economy.

Still, further shrinkage of the major audit firms is not likely to help keep companies in the U.K. or U.S. more honest. The last recession contributed to the collapse of one major auditing firm, Arthur Andersen. Hopefully that won’t happen this time around. Even if the damage is contained to the U.K., any major auditing firm forced to close its doors in the U.K. is not likely to inspire much confidence when it signs off on the financial statements of a company in the U.S.