Once completed, the auditor`s findings are presented in a report that appears in the foreword to the annual financial statements. Separate and private reports may also be provided to company management and regulators. (2) Limiting response volume. The lawyer should set out in his reply the scope of his mandate by the client in a limited manner. The lawyer should also indicate the date of notification and refuse any obligation to inform the auditor of any changes that may be brought to his attention at a later date. * It is reasonable to assume that the policy statement will be widely disseminated and easily accessible to the auditor`s profession. Specifically, the policy statement has been reproduced as Exhibit II of the Statement on Auditing Standards, „A Client Attorney`s Investigation of Litigation, Claims and Valuations,“ issued by the Auditing Standards Executive Committee of the American Institute of Certified Public Accountants. Therefore, the mechanism of its inclusion by reference will facilitate communication between counsel and auditor. Inclusion should include not only the restrictions contained in paragraphs 2 and 7 of the Statement of Principles, but also the explanatory documents set out in this commentary. There are growing concerns about auditors` legal liability. Chartered accountants are very important people because they are ultimately responsible for increasing the reliability of financial statements for all types of external users.
Like other professionals, they can be held civilly and criminally liable in the performance of their duties.06 An auditor generally has no legal expertise and therefore cannot make a legal judgment on the information brought to his attention. Therefore, the auditor should ask the client`s management to send a letter of request to the lawyers with whom management has consulted regarding litigation, claims and assessments. (5) Risk of loss. Paragraph 3 clarifies that counsel may limit his or her submissions to matters which, individually or collectively, are relevant to the auditor`s investigation. If counsel takes responsibility for concluding that a question is not material for the purposes of their response to the review inquiry, they must clarify that their response is so limited. In such circumstances, the statutory auditor should be able to rely on the lawyer`s reply to provide the necessary confirmation. It should be emphasized that the client`s employment of an in-house general counsel should not affect the acceptance of his or her response, as the in-house general counsel is just as fully bound by the professional obligations and responsibilities contained in the Code of Professional Responsibility as external lawyers. If the audit investigation contains a definition of materiality, but the lawyer applies a different materiality test, this must be explicitly stated. The lawyer may wish to agree with the auditor on the materiality test to be applied in his response, but he is not obliged to do so if he assumes responsibility for the criteria used to determine materiality.
Such an agreement with the auditor should be mentioned or set out in the lawyer`s response. In this context, it is assumed that the materiality test thus agreed upon would not be so low as to result in disability service for the client and unreasonable burden on the lawyer.04 With respect to litigation, claims and assessments, the independent auditor should obtain relevant audit evidence to: With respect to paragraph (a), Overtly threatened litigation means: that a potential claimant has expressed to the client their knowledge and current intention to assert a potential claim or assessment, unless the likelihood of litigation (or settlement if the dispute would normally be avoided) is considered low. With regard to clause (c), where a potential claimant has not expressed his knowledge and current intention to make a possible claim or assessment in accordance with the considerations and concerns set out in the preamble and paragraph 1, the client should only ask the lawyer to provide information to the auditor: if the client has determined that it is likely that a possible claim will be made. that there is a reasonable possibility that the result (assuming such an allegation) would be adverse and that the resulting liability would be material to the client`s financial situation. Examples of such situations could include (depending on the circumstances): (i) a disaster, accident or similar physical event in which the Client is involved and notorious, or (ii) an investigation conducted by a government agency where enforcement proceedings have been initiated or where there is a low probability that it will not be initiated, in certain circumstances: including one or more private remedies would normally be expected, or (iii) public disclosure by the client acknowledging (and thereby drawing attention) the existence of one or more probable claims arising out of an event or circumstance. In assessing whether or not the client is likely to make a potential claim, the client is generally expected to use concepts similar to those of counsel (see below) to assess the likelihood of an adverse outcome due to inherent uncertainties and insufficient data availability; Therefore, the assertion of a potential claim would only be considered likely if the prospects of its claim appear sufficiently certain (i.e. supported by external evidence strong enough to give rise to a presumption that it will materialize) and if the chances of non-assertion appear slim. As stated in paragraph 4 of these GTC, the Auditor may assume that all risks of loss indicated by the Client in the manner specified in clauses (b) and (c) have been commented on in the response, unless otherwise stated.