Note: This document, as presented herein, was approved by the Board of Governors of the American Bar Association in December 1975, with formal measures allowing its disclosure to lawyers and accountants such as the standard recommended by the American Bar Association for Counsel`s Response to Audit Letters. **In some cases, it may be appropriate for the response to be provided by in-house legal counsel other than in-house general counsel, in which case this letter should be amended accordingly. Note: A legal counsel`s opinion on specific tax matters that he or she is expected to address and to which he or she has given significant attention, as required by this Standard, is sometimes evidence necessary to support the auditor`s conclusions about income tax accounts and disclosures. However, verifying income tax accounts and disclosures requires a combination of tax expertise and knowledge of the client`s business accumulated during all aspects of an audit. Therefore, it is not appropriate for the statutory auditor to rely solely on such legal advice in relation to those tax matters without making his own assessment of the facts relating to the material tax accounts and the disclosures in the financial statements, taking into account the relevant tax and accounting requirements and his or her understanding of the entity and its environment. and other relevant audit evidence obtained.5A (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 professionally in this regard and has paid particular attention to this in the form of legal representation or advice: The public interest in protecting the confidentiality of communications between the lawyer and the client is fundamental. 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. (2) Limiting response volume. The lawyer should set out in his reply the scope of his mandate by the client in a limited manner.
The lawyer should also indicate the date of notification and refuse any obligation to inform the auditor of any changes that may be brought to his attention at a later date. * It also recognizes that our legal, political and economic systems depend to a large extent on public confidence in published financial statements. To meet this need, the auditor must establish and adhere to standards and procedures that create confidence in the audit process. However, it is not considered necessary or reasonable to interfere with the confidentiality of the lawyer-client relationship in order to obtain that trust. On the contrary, the objective of fair disclosure in the financial statements is likely to be better served by preserving the integrity of the confidential lawyer-client relationship, which will increase management`s confidence in legal advice and encourage management`s willingness to seek advice and act in accordance with counsel`s advice. [If the request letter requests information on certain possible unclaimed claims or assessments and/or contractually assumed obligations:] Paragraph 7 also recognises that it may be in the client`s interest to protect, if and to the extent possible, the information contained in the lawyer`s reply to the statutory auditor against unnecessary disclosure or use beyond the intended purpose of informing the statutory auditor. For example, the response may contain information that could impede efforts to resolve a pending dispute described in the response. The requirement for consent to further disclosure or reasonable notice where disclosure may be required by legal process or may be necessary to defend the audit is intended to give counsel an opportunity to consult with the client on whether consent should be withheld or restricted or, in the case of legal proceedings or the auditor`s defence of the audit: whether steps can and should be taken to challenge the need for further disclosure or to take protective measures in this context. It is assumed that the proposed twenty-day advance standard would normally be a reasonable minimum period of time for this purpose.
The ABA`s Statement on Audit Responses: A Framework That Stood the Test of Time Alan J. Wilson, Stanley Keller, Randall D. McClanahan, Noël J. Para, James J. Rosenhauer, and Thomas W. White, Audit Responses Committee, ABA Business Law Section, 75(3): 2085-2102 (Summer 2020) This article summarizes key developments in the preparation of audit responses to loss cases since the American Bar Association`s Statement of Policy Regarding Lawyers` Responses to Auditors` Requests for Information was published in 1976. These developments illustrate both the usefulness of the ABA statement framework and the responsiveness of the American Bar Association, through the Business Law Section`s Audit Responses Committee (and previous committees), to issues arising from the ABA`s statement, and to changes in accounting and auditing standards and practices. In recognition of this ethical obligation, counsel must take care to fully disclose to their client any trust, secrecy or examination that is to be disclosed to others, including the client`s auditor, and to ensure that the officer or representative of a client firm who consents to disclosure understands the legal consequences and has the authority to give the necessary consent. [Examples of letters to an external practitioner or law firm and an internal general counsel to the auditor`s request letter. These illustrative forms, which are not part of the policy statement, have been prepared by the Review Survey Response Committee for the sole purpose of assisting those who wish to do so, for reference, to receive a response form that includes the principles of the policy statement and the accompanying comments. Other forms of response may be appropriate depending on the circumstances.] .13 A lawyer`s refusal to provide the information requested in a letter of investigation in writing or orally (see paragraphs .09 and .10) would sufficiently limit the scope of the audit to exclude an unqualified opinion (see paragraphs .05 and .06 of AS 3105, Deviations from Unqualified Opinions and Other Reporting Circumstances).7 Lawyer`s response to such a request and requirements set out in paragraph .05 Procedures provide the auditor has sufficient audit evidence to ensure that ongoing or imminent litigation, claims, and valuations are recognized and reported. The statutory auditor shall have sufficient audit evidence to satisfy himself that the claims and unclaimed valuations are disclosed in the financial statements resulting from the abovementioned procedure and that the lawyer`s liability to his client for disclosure obligations is explicitly acknowledged (see paragraph .09g).
This approach to unsolicited claims and assessments is necessary because of the public interest in protecting the confidentiality of solicitor-client communications.
