A LAWYER’S RESPONSE TO AN AUDIT LETTER IN CONNECTION WITH CONTINGENCIES REPORTING－US PERSPECTIVE
Date Issued
2007
Date
2007
Author(s)
Tsai, Eric C.A.
DOI
en-US
Abstract
Effective reporting of contingencies takes two professions—auditors and lawyers-- to dance. However, traditionally, play role of auditors and lawyers are different; auditors shall disclose contingencies as he performs audit work, while lawyers shall maintain confidentiality of his client’s information unless the laws provides otherwise. From US perspective, this thesis addresses two vital public interests – the public company audit function and protection of the attorney work product doctrine and attorney-client privilege – as well as their intersection, in connection with the contingencies reporting. By way of introducing the “Treaty” between auditors and lawyers (details see below) in US and indicating its development and issues in application, this thesis tends to give a general survey on the matter for the reference of Taiwan practice.
While auditors have historically planned and performed their audits in such a manner that they can obtain reasonable assurance that a company’s financial statements are not materially misstated, sparked by the corporate scandals of 2001-2002 in US, however, the Securities & Exchange Commission (“SEC”) and the Public Company Accounting Oversight Board (“PCAOB”) have focused attention on strengthening the auditors’ vigilance. Once auditors perform their audit work and seek and then obtain access to the company’s privileged information regarding a variety of circumstances and issues, companies are increasingly losing expectation that their information will remain confidential. Specifically, pursuant to FAS 5, auditors may require public company clients to disclose loss contingencies by asking a corporation’s legal counsel disclose their judgments and supporting information regarding potential outcome, range of loss and other issues resulting from litigation, claims and assessments against the company; as a matter of policy, however, a legal system that fails to assure public companies the protection of the attorney-client privilege and work product protection denies those companies the effective assistance of counsel when potentially illegal corporate behavior is discovered. In 1975, the audit and legal professions in US reached an accord – or “Treaty,” regarding the waiver problem arising when auditors ask their clients for privileged information related to the judgments of company counsel regarding loss contingencies for litigation, claims and assessments. This “Statement of Policy Regarding Lawyers’ Responses to Auditors’ Requests for Information,” as adopted by the ABA and consented to by the AICPA, struck a balance between two very important public interests, by limiting the range of acceptable disclosures that lawyers may make to auditors with the client’s informed consent, and thus defined the scope of what the auditors may request from lawyers regarding confidential attorney information.
The Treaty in US is not without problem and is in no way perfect; communication between two professions would definitely bring benefit, however, for the purpose of contingencies reporting. In Taiwan, no similar Treaty between two professions is found for the contingencies reporting purpose and therefore practice in this connection varies. By way of introducing US practice --the Treaty and relevant development of laws and relevant regulations-- from past to current, this thesis tends to bring our attention to this subject matter and expect to entail dialogue between two professions in this connection in Taiwan.
Subjects
或有事項
保密義務
Contingencies
Confidentiality
Attorney work product doctrine
Attorney-client privilege
Type
other
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