A lawyer`s refusal to provide the information requested in a letter of inquiry, in writing or orally (see paragraphs .09 and .10), would limit the scope of the review sufficient to exclude an unqualified opinion (see sections 508.22 and .23). fn 7 A lawyer`s response to such a request and to the procedure referred to in paragraph .05 shall provide the statutory auditor with sufficient evidence to ensure the accounting and reporting of ongoing and imminent disputes, claims and valuations. The auditor must have sufficient evidence to ensure the declaration of unclaimed claims and the estimates to be disclosed in the financial statements of the above-mentioned procedure, as well as the explicit acknowledgment of his responsibility to his client with regard to the disclosure obligations (see paragraph .09g). This approach to unclaimed claims and assessments is necessary because of the public interest in protecting the confidentiality of communications between lawyer and client. The letter of legal representation provided to the auditor by the legal department of the federal reporting company requires a determination of the completeness of the list of disputes, claims and assessments, including matters handled by the DOJ or other external legal counsel on behalf of the Federal Reporting Unit. The auditor`s review of this assertion of completeness is primarily based on the assessed effectiveness of the federal reporting company`s internal control structure in identifying, measuring and accounting for legal disputes, claims and valuations. The auditor may also need to request additional information from the Federal Reporting Unit or doJ or other external legal counsel to obtain evidence of the assertion of completeness. Such requests to the DOJ or other external legal advisers should be addressed through the management of the Federal Reporting Office. In addition, the statutory auditor should assess whether the scope of the audit is limited by the inability to obtain sufficiently competent evidence regarding the allegation of completeness for disputes, claims and valuations. fn 5 It is not intended that the lawyer will be asked to re-examine all the elements on which he has been consulted during the examination period in order to determine whether he can draw a conclusion as to the likelihood of making an allegation related to any of the facts thus examined. Issues that should be addressed in an audit request include, but are not limited to, the following: It is fair to say that auditors and lawyers do not always agree to standardize the content of audit investigations and audit responses; However, the logistics of the audit confirmation process are acceptable and can be met by accountants and lawyers. This will better protect all stakeholders, including accounting firms, law firms, clients and financial markets. Since events or conditions that should be taken into account in financial accounting and the reporting of disputes, claims and valuations are matters that fall within the direct knowledge and often control of the management of a company, management is the main source of information on these matters.
Therefore, the independent auditor`s procedures with respect to disputes, claims and valuations should include: fn 3 An example of a separate letter is as follows: We are writing to inform you that (company name) has demonstrated to us that (except as set out below and excluding the issues listed in the audit request letter) no potential void claims that you have indicated are likely to be recoverable and they are disclosed in accordance with Accounting Standards No. 5 [AC Section C59] in their financial statements on (balance sheet date) and for the period that expired on that date. (List any possible claims that may not have been claimed.) Such a letter must be signed and sent by the examiner. A letter of representation from legal counsel to the auditor in response to an audit letter from management to legal counsel is the primary means for the auditor to confirm the information provided by management regarding the accuracy and completeness of disputes, claims and valuations. The auditor should ask senior management to send an audit letter to a lawyer with whom management has consulted regarding litigation, claims and assessments. A materiality limit for the legal representation letter is usually set in the audit request letter, which is based on an agreement between management and the auditor. The management of the Federal Information Unit is responsible for adopting policies and procedures for the identification, measurement and accounting of litigation, claims and valuations as the basis for the preparation of financial statements in accordance with the requirements of the Chief Financial Officers Act, 1990 and the Management Reform act, 1994. This includes litigation, claims and assessments that are handled by legal counsel external to the legal department of the federal reporting company. The audit letter is analyzed by the accounting firm and sometimes discussed in more detail with the client. Before the audit opinion is issued, the Firm may be consulted one last time to ensure that no other significant developments or new issues have been raised. All disclosures are included in a footnote on contingencies or legal issues, and all provisions are reflected in the balance sheet. Lawyers` Responses to Auditors – Some Practical Aspects James J.
Fuld, 44(1): 159–67 (Nov. 1988) Each year, clients ask their lawyers to advise clients` 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 certain practical aspects of compliance with the Treaty. Investigation by a client`s counsel regarding disputes, claims and assessments: Audit Interpretation AU Section 337 Subcommittee on Responses to Audit Inquiries, 45(4): 2245-52 (August. 1990) This report discusses the use of certain statements in letters from the client or lawyer to preserve solicitor privilege or solicitor`s work product privilege. The report was prepared in consultation with representatives of the Auditing Standards Division of the AICPA Auditing Standards Board. Guidance for Lawyers Responding to the OTS Revised Attorney Letter Ad Hoc Committee on OTS Attorney Inquiry Letters, 50(2): 607–61 (February. 1995) In order to address concerns related to the Savings Orders Oversight Office`s request that Savings ask their lawyers to provide federal auditors with written information on a variety of issues, including litigation, foreclosure, attorneys` fees, and lawyer-controlled documents and funds, the CSTO invited members of the Private Bar Association to participate in informal consultations and discussions on participate in the proposed revisions of the CSO Lawyer`s Letter. A special committee of the Business Law Section was formed in response to this invitation and was actively involved in the attempt to guide people in the development of the lawyer`s revised letter and accompanying comments.