11 novembre 2022

Legal Response to Audit Letter

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It is also considered appropriate to recognize that the lawyer was not necessarily authorized to investigate or have investigated all of the client`s legal issues, even if he becomes aware of certain facts that could potentially pose a legal problem during the investigation and development. Thus, an examination in the form of a provisional or temporary opinion or relating to an incomplete or hypothetical fact, or where the lawyer has not been invited to pay particular attention to the facts in question, does not fall within the concept of « material attention » and is therefore excluded. Also excluded are matters that have been mentioned by the client but are not actually dealt with by the lawyer. Paragraph 2 undertakes to address these concerns. As stated in paragraph 4 of these GTC, the Auditor may assume that all risks of loss indicated by the Client in the manner specified in clauses (b) and (c) have been commented on in the response, unless otherwise stated. The lawyer should not be required to provide the auditor with information on the risk of loss, except as provided for in this paragraph 5.08. An audit request letter addressed to the client`s lawyer is the auditor`s primary means of obtaining confirmation of information provided by management on disputes, claims and assessments. 5 Evidence obtained from the client`s in-house general counsel or legal department may provide the auditor with the necessary confirmation. However, evidence obtained by an in-house lawyer does not replace information that an outside lawyer refuses. †Note: See paragraph 3 of the Policy Statement and accompanying commentary for guidance if the response is limited to the essential elements. [If the request letter requests information on certain possible unclaimed claims or assessments and/or contractually assumed obligations:] In other words, for the purposes of counsel`s response to a request to advise auditors on a dispute, an adverse outcome is « likely » only if the client`s chances appear slim and the plaintiff is unsuccessful, appears extremely doubtful; It will be « distant » when the client`s chances of losing, seem slim and not winning seem extremely doubtful.

It is therefore to be expected that, in most situations, an adverse outcome will be neither « probable » nor « remote » within the meaning of the Declaration of Principles. An examination of matters that are not considered material is not necessary, provided that the client and the statutory auditor have agreed on the limits of materiality for this purpose.10 In special circumstances, the statutory auditor may receive a response at a conference on matters covered by the audit letter, This gives him the opportunity to discuss and explain in more detail than a written response. A conference may be appropriate if the assessment of the need to consider or disclose disputes, claims and assessments includes issues such as assessing the impact of legal advice on outstanding legal issues, the impact of unconfirmed information or other complex judgments. The statutory auditor should adequately document conclusions on the need to recognise or disclose disputes, receivables and valuations. After the date of the letter [insert date of request], Mr. [insert name and title of officer`s signature request] of [insert name of client] [(the « Company ») or (together with its subsidiaries, the « Company »)] asked us to provide you with certain information as part of your audit of the Company`s accounts as of [year-end]. (5) Risk of loss. At the appropriate request of the client, the lawyer should provide the auditor with information on the following matters if the lawyer has been appointed by the client to represent or advise the client in a professional manner in this regard and has paid particular attention to this in the form of legal representation or advice: In accordance with the above considerations of public policy, it is considered appropriate to distinguish between litigation that is pending or to which a third party has notified the customer of its current intention and, on the other hand, other contingencies of a legal nature or legal aspects. With respect to the first category, there is no doubt that the lawyer representing the client in a dispute may be the best source to describe the claim(s) invoked, the client`s position (e.g. Rejection, Challenge, etc.) and the client`s potential exposure to litigation (to the extent that the lawyer is able to do so). With respect to the latter category, it is argued that, for the reasons set out above, it is not in the public interest for counsel to be obliged to answer general questions from auditors about possible claims. Appendix A of AS 1105, Audit Evidence, applies when an auditor uses the work of a firm`s lawyer as audit evidence in matters relating to legal expertise, excluding litigation, claims and valuations (which fall within the scope of this standard) and income taxes.

For example, Appendix A to AS 1105 applies when a legal interpretation of a contractual provision or legal opinion to isolate the transferred financial assets is necessary to determine appropriate accounting or information within the applicable accounting framework.11 In certain circumstances, a lawyer may be required by his or her professional code to resign if his or her financial accounting advice and litigation reports, Complaints and evaluations are not taken into account by the customer. If the auditor knows that a client has changed lawyers or that a lawyer hired by the client has resigned, he or she should consider the need to investigate the reasons why the lawyer is no longer associated with the client.14 A lawyer may not be able to rely on the likelihood of an adverse outcome of the dispute due to inherent uncertainties, Respond to claims and assessments or the amount or extent of potential loss. Factors influencing the likelihood of an adverse outcome may not be within the competence of a lawyer; The Company`s historical experience in similar litigation or the experience of other companies may not be relevant or available; And the amount of potential loss can often vary widely at different stages of litigation. Therefore, a lawyer may not be able to draw a conclusion on such issues. In such circumstances, the statutory auditor will normally conclude that the financial statements are affected by uncertainty as to the outcome of a future event that cannot reasonably be estimated and should follow the guidelines of AS 3105.28 to .32 in determining the impact of the lawyer`s response to the auditor`s report. 6The American Bar Association has adopted a « Policy Statement on Lawyers` Responses to Chartered Accountants` Requests for Information, » which explains lawyers` concerns and the nature of the limitations an accountant is likely to encounter. This policy statement is reproduced in Appendix II (AS 2505C) for the convenience of readers, but does not form an integral part of this statement. The public interest in protecting the confidentiality of solicitor-client communications is of fundamental importance. The U.S. legal, political and economic system relies heavily on voluntary compliance with the law and easy access to a respected panel of professionals capable of interpreting and advising the law.

The increasing complexity of our laws and regulatory requirements increases the need for fast, specific and unfettered communication between lawyer and client. The benefits of such communication and early consultation underlie the lawyer`s strict legal and ethical obligations to maintain client trust and secrecy, as well as the long-recognized testimonial privilege for solicitor-client communication. Considerations relating to the difficulty of estimating damage (or margin) in ongoing litigation are obviously even more persuasive in the case of unpresented potential claims. In most cases, the lawyer will not be able to provide such an estimate to the auditor.05 Since the events or conditions that should be considered in accounting and reporting on disputes, claims and valuations are matters that fall within the direct knowledge and often control of a company`s management, The Directorate is the primary source of information on these issues. Accordingly, the independent auditor`s procedures with respect to disputes, complaints, and assessments should include: (1) the client`s consent to the response. The lawyer may respond to the auditor`s requests for information on the risk of loss (the term and concept used in Statement of Accounting Standards No. 5, issued by the Financial Accounting Standards Board in March 1975 and discussed in paragraph 5.1 of the accompanying commentary) to the extent set out below, subject to the following conditions: [The auditor may ask the client to inquire about other matters, such as unpaid or unbilled fees or certain information about certain contracts. Corporate obligations, such as guarantees for the indebtedness of others.] Lawyers` Responses to Auditors – Some Practical Aspects James J. Fuld, 44(1): 159–67 (Nov. 1988) Each year, clients ask their lawyers to advise their auditors on client « contingencies. » A « contract » approved by the American Bar Association and the American Institute of Certified Public Accountants sets out certain guidelines.

This article deals with some practical aspects of compliance with the Treaty.

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