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When Is a Legal Letter Required in an Audit

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Both the Code of Professional Responsibility and cases where the privilege of proof is applied recognize that the client may knowingly and voluntarily waive the privilege of disclosure. It is equally clear that disclosure to third parties can result in the loss of the “confidentiality” essential to maintaining privilege. The disclosure of solicitor-client communications on a particular subject to third parties may also destroy the privilege of other communications on that subject. Thus, the mere disclosure by the lawyer to the external auditor of the content of the communication between the lawyer and the client may, with the client`s consent, significantly affect the client`s ability to maintain the confidentiality of those communications in other contexts. FASAB Design No. 2 states that “the management of the government institution, as recommended by the Department of Justice, shall determine whether legal action is likely to result in a loss to the federal entity and the loss can be estimated.” The DOJ is concerned that the wording of the interpretation could lead authorities to conclude that the DOJ is the sole source of legal representation letters in cases where DOJ lawyers handle legal matters on behalf of other federal reporting units. It is fair to say that auditors and lawyers do not always agree on the standardization of the content of audit requests and responses to audits. However, the logistics of the audit confirmation process are acceptable and can be met by accounting and legal practitioners. In this way, all stakeholders, including accounting firms, law firms, clients and financial markets, are better protected.

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 order to better understand the process of obtaining information to assess legal contingencies, a review of the legal confirmation process is required, which is impartial due to the different disclosure requirements and consideration of solicitor-client privilege. And it`s in the 2017 version of this resource from the even older version of this session (available here, with standard caveats that updates, changes, and deletions, often done for a reason) contains a specific history of audit letters from law firms that play a role in a DOJ case: SEC v.RPM International Inc., Box 1: 16-cv-01803 (D.D.C. Sept. 9, 2016): Crucially, auditors can still maintain control over the confirmation process through technology, which means auditors control the delivery of the audit request and the receipt of the audit response. Here is an audit confirmation best practices workflow that emphasizes the importance of validating and controlling the auditor throughout the confirmation process. This section provides guidance on the procedures that an independent statutory auditor should follow to identify disputes, complaints and valuations and to ensure accounting and disclosure of these matters when conducting an audit in accordance with generally accepted auditing standards. The main risks of the traditional process arise when validation is ignored or the auditor`s control over the process is lost. Once the audit request has been prepared and signed by the client, auditors must and must consider both risks and take steps to reduce or eliminate them. The above analysis on the very limited basis of outcome judgments applies even more vigorously to a judgment on whether or not the assertion of a claim that has not yet been made is “probable”. Such a decision is rarely within the professional competence of lawyers and, therefore, the lawyer should not make such an assessment, unless such a decision becomes significant due to special circumstances such as disasters, investigations and previous information within the meaning of paragraph 5 of the Statement of Principles or similar external evidence relevant to such an assessment. In addition, it is unlikely that the Customer or any other person will be able to make an informed assessment that making a potential claim is “likely” and not “reasonably possible” (in which case disclosure is not required).

Given the legitimate concern that the public interest would not be well served if uncertainties were resolved in a manner that encourages the assertion of claims or otherwise causes unnecessary harm to the customer and its shareholders, the decision to treat an unclaimed claim as “likely” to be made should be based only on compelling discretion. The audit usually includes certain other procedures that are conducted for different purposes and can also reveal disputes, claims and assessments. Examples of these procedures include: To understand the importance of the auditor`s investigation and the implications of a lawyer`s response, the lawyer should be familiar with the following FAS 5 accounting concepts and requirements|| `A paragraph “subject to an audit opinion” or “other than an audit opinion” in which these formulations refer to the scope of the audit and indicate that the statutory auditor has not been able to ascertain any material element of the financial statements shall be included in the certificates submitted to the Commission in connection with the offer of securities to the public: Unacceptable. The `subject to` restriction is appropriate when reference is made to a middle paragraph or footnotes explaining the status of issues that cannot be resolved at the time of the statement. While validation is necessary for auditors to maintain their professional skepticism in accordance with auditing standards, it is equally important for law firms. Since law firms keep highly confidential information, it is in everyone`s interest to only share this information with duly authorized persons. For this reason, the authentication of the accounting firm to which law firms send audit responses is also crucial. Requests for review should be sent to lawyers, who may be in-house or external counsel who have primary responsibility and knowledge of certain disputes, claims and assessments. Where in-house counsel deal exclusively with disputes, complaints and reviews, their evaluation and response is generally considered appropriate. If in-house and external counsel were involved in the cases, but the in-house counsel assumed primary responsibility for the cases, the in-house counsel`s assessment may well be considered appropriate.

However, there may be circumstances in which litigation, claims, and judgments involving significant involvement of outside counsel are of such significance to the financial statements that the auditor should consider asking outside counsel to respond that they have not made a substantive conclusion materially different from the in-house consultant`s opinion. although in-house counsel may have primary responsibility. “If the underlying cause of the dispute, claim or valuation is an event that occurred before an entity`s balance sheet date, the likelihood of an adverse outcome to the entity shall be assessed to determine whether the condition set out in paragraph 8(a) is met.