When providing information to an auditor, the lawyer may rightly limit himself to the risks of loss that he may have for the client on a substantial basis in the form of legal advice (advice and other attention to matters that are not the subject of a legal dispute by the lawyer in a professional capacity) or legal representation (registered legal advice or other direct professional liability for a matter in dispute). Investigations by some auditors go even further, asking for information on matters of which the lawyer is „aware.” Lawyers are concerned that such a broad request may include information from a variety of sources, including social contacts and third parties, as well as professional commitments, and that the lawyer may be criticized or subject to liability if some of this information is forgotten at the time of the auditor`s request. In accordance with the foregoing considerations of public policy, it is considered appropriate to distinguish between a dispute which is ongoing or to which a third party has expressed the current intention to initiate and other contingencies of a legal nature or involving legal aspects. With regard to the first category, the lawyer representing the client in a contentious case may undoubtedly be the best source for a description of the claim(s) claimed, the client`s position (e.g. refusal, dispute, etc.) and the client`s possible exposure to the dispute (to the extent that the lawyer is able to do so). With regard to the latter category, it is not in the public interest, for the reasons set out above, for the lawyer to be required to respond to the auditors` general requests concerning possible claims. The public interest in protecting the confidentiality of communications between lawyers and clients is fundamental. U.S. legal, political, and economic systems rely heavily on voluntary compliance with the law and easy access to a respected group of professionals who can interpret and advise the law. The increasing complexity of our laws and government regulations increases the need for fast, specific and unhindered communication between lawyer and client. The benefits of such communication and early advice underlie the lawyer`s strict legal and ethical obligations to maintain the client`s trust and secrets, as well as the long-recognized privilege of testimony for lawyer-client communication.08 An audit request letter to the client`s lawyer is the primary means for the auditor to confirm the information provided by management on To obtain disputes, complaints and assessments.
5 Evidence obtained from the client`s in-house general counsel or legal department may provide the auditor with the necessary confirmation. However, evidence obtained from an in-house lawyer does not replace information that an outside lawyer does not provide. (4) Limited responses. If the lawyer restricts his or her response in accordance with the policy statement, this should be indicated in the response (see paragraph 8). If, in any other respect, the lawyer does not undertake to respond to or comment on certain aspects of the investigation when responding to the statutory auditor, he or she should consider informing the statutory auditor that his or her response is limited in order to avoid concluding that the lawyer has responded to all aspects; Otherwise, he can assume a responsibility that he does not intend to do. Both the Professional Liability Code and the cases in which evidentiary privilege is applied recognize that the privilege against disclosure may be knowingly and voluntarily revoked by the client. It is equally clear that disclosure to third parties may result in the loss of the „confidentiality” essential to maintaining privilege. Sharing communication between the lawyer and the client on a particular topic with a third party may also destroy the privilege of other communications on that topic. Therefore, the mere disclosure of the content of the lawyer-client communication by the lawyer to the external auditor, with the client`s consent, may significantly affect the client`s ability, in other contexts, to maintain the confidentiality of such communications. „probable” – An adverse outcome is generally „likely” if, but only if the investigation, preparation (including factual development and legal research) and progress of the case have reached a stage where a judgment can be rendered taking into account all relevant factors that may influence the outcome, that it is extremely doubtful that the client will prevail. [The auditor may ask the client to inquire about additional matters, such as unpaid or unbilled fees or certain information about certain contractual obligations of the company, such as: Guarantees for the indebtedness of others.] Paragraph 3 clarifies that counsel may limit his or her answers to matters relevant to the auditor`s investigation, individually or collectively. If counsel assumes responsibility for determining that a question is not material for the purposes of their response to the review inquiry, they should clarify that their response is so limited.
In those circumstances, the statutory auditor should be entitled to rely on the lawyer`s response to give him the necessary confirmation. It should be emphasized that the client`s employment of an in-house general counsel should not affect the client`s acceptance of the response, since the in-house general counsel is just as fully bound by the professional obligations and responsibilities contained in the Code of Professional Responsibility as the external counsel. If the examination contains a definition of materiality, but the lawyer applies another materiality test, he or she must explicitly state this. Counsel may wish to agree with the auditor on the materiality test to be applied in his or her reply, but is not required to do so if he or she assumes responsibility for the criteria used to determine materiality. Such an agreement with the auditor must be mentioned or set out in the lawyer`s response. In this context, it is assumed that the materiality check thus agreed would not be so small as to render a disservice to the client and an unreasonable burden on the lawyer. It is recognized that disclosure requirements for companies subject to the reporting requirements of federal securities laws are a major concern of officers and consultants, as well as auditors. It is argued that compliance is best ensured when clients receive the highest level of encouragement to seek free advice through the protection of the client`s legal silence. Lawyers should also be aware of the importance of providing their clients with competent advice in this area.
Several requirements must be met for a taxpayer to be able to deduct statutory or other expenses as business or business expenses, or as expenses related to income generation. Each of these requirements is discussed in detail in Section I of this portfolio. Determining whether these types of expenses are deductible is based on an analysis of all relevant facts and circumstances. In the context of litigation costs, the „origin of claim” test is used to determine whether a particular expense is deductible. This test is discussed in detail in I, D, 3. Whenever an insurance company or APT takes another audit employee on board, there are significant overheads such as office space, salaries, and benefits. There are also less obvious costs. Staffing an exact level of staff is not an easy task.
Once a case is closed, the cost of increasing staff does not stop. The company needs to find other tasks for this new, larger legal invoice audit team or start the dismissal process, which hurts morale and reputation. The next time a major bill revision is introduced, it may be more difficult to rehire employees. Technically, one should look for an auditor who can create accurate computer-assisted reports for analysis and presentation. Just because a computer is used to generate the reports does not mean that they are correct if incorrect assumptions are made, if the database file is not created correctly, or if the reports are not carefully generated. Mistakes are often made. Schedule A of REGULATION 1105, Audit Evidence, applies when an auditor uses the work of a firm`s lawyer as audit evidence for matters relating to legal knowledge relating to other disputes, claims and valuations (covered by this Standard) and income tax.