Audit Response Letters and Disclosures: Counsel's Role in Balancing Auditor Demands and Company Privileges

Description

Accountants conducting external audits of a company's financial statements and related disclosures must ask the company for information about "pending or overtly threatened" legal matters, including litigation and government investigations. However, the longstanding ABA Treaty between the legal and accounting professions contemplates that attorneys providing this information will limit their discussion of these matters to protect attorney-client privilege and the company's litigation position.

In recent years, auditors have pushed for information from attorneys beyond the ABA Treaty, and counsel must deal with more difficult issues in their responses to audit letters. When responding to auditors, counsel must act carefully and strategically. This includes an internal inquiry to determine what to disclose in the response, setting a mutually agreed upon dollar amount threshold for materiality, including a confidentiality clause in the audit engagement letter.

Listen as our authoritative panel discusses recent trends in audit response letters and the complicated legal issues counsel must navigate in determining what to disclose in their responses.