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

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 complex 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, and 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.

I. Latest trends in audit response letters

II. External audits: duties of auditors and attorneys

III. Attorney-client privilege issues with audit response letters

IV. Best practices for responding to auditor inquiries

The panel will review these and other key issues:

• Legal and accounting professionals: the ABA Treaty regarding external audits of companies
• Attorney-client privilege concerns implicated by requests for information from counsel during external audits
• Best practices for counsel for responding to external auditor requests for information