Revenues at the Big Four - PricewaterhouseCoopers, Deloitte & Touche, Ernst & Young and KPMG - have grown at a double-digit pace in recent years as audit fees soared. Regulatory overhauls enacted in the wake of accounting scandals earlier this decade have led to new work for firms. One of the biggest problems facing the Big Four these days is a lack of staff to meet the huge demand for services.

Yet the Big Four want to limit court damages that investors and others can seek from them for flawed audits of public companies. Without such a shield, the firms say, it's only a matter of time before one of them is felled by a massive court award.

Their argument is being championed by an influential group recently formed to study the competitiveness of U.S. financial markets with the encouragement of Treasury Secretary Henry Paulson. The group is expected to recommend in coming weeks that the government enact new protections for auditors. A panel set up within the powerful U.S. Chamber of Commerce is sounding a similar theme. In Europe, the European Commission is studying the issue and is likely to recommend limitations on the damages accounting firms can face.

How much risk the big firms actually face has been largely absent from the debate over auditor liability. Despite a slew of big-ticket lawsuits that emanated from corporate scandals earlier this decade, none of the firms suffered a fatal blow from those legal actions. The one big firm that folded, Arthur Andersen LLP in 2002, fell victim not to a lawsuit but to a criminal obstruction-of-justice conviction, later overturned on appeal.

"I don't see that auditors have a real need for any kind of special protections," said Bill Kelley, general counsel at the Retirement Systems of Alabama, which has sued accounting firms following corporate blowups. "Auditors need to be held to a high standard. Those are the outsiders we rely on. It's tough to have that responsibility, but that's what they're getting paid for."

Mr. Kelley and likeminded critics say it's also difficult to quantify the risk the firms face from a big court award. That's because the accounting firms are private partnerships that don't, in most cases, disclose their financial condition or results. So outsiders don't know how much capital the firms have, their level of profitability or even how much insurance they carry.

If anything, the risk from class-action lawsuits appears to be dwindling. The number of class actions that cite auditors as defendants declined to five last year from 14 in 2002, according to the Stanford Law School Securities Class Action Clearinghouse.

The bigger threat to firms has stemmed not from civil litigation, but from alleged criminal actions related to their conduct. In addition to the Arthur Andersen case, KPMG LLP suffered a near-death experience last year due to its sale of improper tax shelters; federal prosecutors ultimately decided not to indict the firm, a move that likely would have put it out of business.

The Andersen and KPMG cases have led some lawyers to claim that the Big Four are already seen by government as too big to fail. "The fact is that the government couldn't indict KPMG for policy reasons," said Sean Coffey, a partner at New York law firm Bernstein Litowitz Berger & Grossmann LLP, who has sued several accounting firms. "These folks are effectively immune to being put out of business and now they're trying to find ways to further inoculate themselves from accountability."

The firms also have shown they can weather pretty big hits. Over the past two years, KPMG has agreed to pay out nearly $700 million in fines and settlements related to criminal and civil actions. In 2000, Ernst & Young LLP settled for $335 million a shareholder suit related to its work for Cendant Corp.

Accounting firms argue the danger they face from civil litigation is real and that there are still many scandal-era actions that have yet to work their way through the courts. What is needed, the firms say, are litigation caps similar to those many states have enacted to protect doctors from malpractice suits.

The firms say special protection is warranted because they can be sued not just by the companies whose books they audit, but also by others, such as investors. These investors, the firms add, try to use auditors to recoup stock-market losses.

"The cost of our audits was never built for insuring the capital markets," said William G. Parrett, chief executive of Deloitte Touche Tohmatsu, the international arm of Deloitte & Touche. "I don't think we're saying we shouldn't have any liability, but it has to be in proportion to our participation in any problem."

The firms also say they can't get sufficient insurance because their liability is almost unlimited, encompassing in a worst-case scenario the total stock-market value of the companies they audit. So they are forced to settle lawsuits rather than risk a trial.

A study for the European Commission, released in September, said the total costs of judgments, settlements, legal fees and related expenses for the U.S. audit practices of the Big Four firms had risen to $1.3 billion in 2004, or 14.2 percent of revenue, up from 7.7 percent in 1999. In addition, according to a study by insurer Aon, there were 20 claims outstanding against U.S. auditors as of September 2005 where damages sought or estimated losses topped $1 billion. Accounting firms say they couldn't survive an award of that size.

Advocates of liability caps frame the issue around the broader debate over U.S. market competitiveness.

"I think the whole issue of liability is one of the major reasons why foreign companies aren't coming here" to list their stocks on U.S. exchanges, said Hal S. Scott, a Harvard Law School professor and a founding member of the Committee on Capital Markets Regulation, the group formed with Mr. Paulson's blessing to study market competitiveness. Mr. Scott added that while court awards can serve as a deterrent to shoddy audit work, "if we left this to the legal process, we might come up with the right amount of damages to deter bad behavior but have just two or three accounting firms" because one will have gone out of business.

Recognizing, though, that auditor liability overhaul might be a tough sell on Capitol Hill, the committee may suggest that the U.S. Securities and Exchange Commission come up with a solution, Mr. Scott said. "The SEC could modify their own rules regarding liability," he added. One idea under study: Allowing accounting firms to negotiate liability caps with clients, a practice now barred to preserve auditors' independence.