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Audit Inquiry Letter to Legal Counsel

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As set forth in paragraph 4 of this Agreement, the Auditor may assume that all have received a comment from the Customer in the response in the manner specified in clauses (b) and (c) above, unless otherwise specified in this agreement. The lawyer should not and does not have to undertake to provide the statutory auditor with information on the risks of loss, except in the cases provided for in this paragraph 5.14 Due to inherent uncertainties, a lawyer may not be able to respond to the likelihood of an adverse outcome of disputes, claims and valuations or the amount or extent of potential losses. Factors that affect the likelihood of an adverse outcome may not fall within the jurisdiction of a lawyer to judge; the Company`s historical experience in similar litigation or the experience of other companies may not be relevant or available; and the amount of potential damages can often vary greatly at different stages of the dispute. As a result, a lawyer may not be able to draw a conclusion with respect to such matters. In such circumstances, the auditor will generally conclude that the financial statements are affected by uncertainty about the outcome of a future event that is not reasonable for a reasonable estimate and should take into account the guidance in RO 3105.28 to 0.32 in determining the impact of counsel`s response to the auditor`s report. Request for review letters should be sent to lawyers who may be in-house or external lawyers who have primary responsibility and knowledge of certain disputes, claims and assessments. If the in-house counsel only deals with disputes, claims, and evaluations, their assessment and response will generally be considered appropriate. If in-house and external lawyers have been involved in the cases, but the in-house lawyer has assumed primary responsibility for the cases, the in-house lawyer`s assessment may very well be considered appropriate. However, there may be circumstances in which disputes, claims and judgments involving significant overall participation of external counsel are of such importance to the financial statements that the auditor should consider seeking the response of external counsel that they have not made a substantive finding that differs in one material respect from the in-house counsel`s assessment, although the in-house legal counsel may assume primary responsibility. 2THE FASB Statement No.

5 [Section C59 of the BOARD] also describes the financial accounting and reporting standards for profit and loss. The auditor`s procedures with respect to write-off accidents are parallel to those described in this Standard for auditing the risk of loss.04 With respect to disputes, claims and valuations, the independent auditor shall seek evidence relevant to the following factors: 4An indicative letter of inquiry to the lawyer is set out in the Annex (AS 2505A). fn 1 This section replaces the commentary « Letters from lawyers », January 1974 (article 1001), and the examination of interpretations of article 560.12 on letters from lawyers, January 1975 (articles 9560.01-.26). It amends paragraph 560.12(d) to read: « Check with the client`s legal counsel for any dispute, claim and assessment (see section 337). » The purpose of the policy statement is to recognize the auditor`s obligation to perform such procedures as may be necessary to ensure the fair presentation of the company`s financial position and results in order to prepare a report containing an opinion that is not qualified due to a limitation in the scope of the audit. In this context, sec Accounting Series Release No. 90 [Financial Reporting Release No. 1, Section 607.01(b)], which states: .01 This section provides guidance on the procedures that an independent auditor should consider to identify disputes, claims and valuations and to ensure financial accounting and reporting for these matters when conducting an audit in accordance with PCAOB standards. 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 early communication and 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. The lawyer`s responsibilities with respect to his client`s disclosure obligations have been the subject of significant discussion and clarification and further advice in this regard could be provided in a timely manner. In any event, if, in the opinion of the lawyer, it is clear that (i) the matter is of material importance and gravity and (ii) there can be no reasonable doubt that their non-disclosure in the client`s financial statements would constitute a violation of the law that would result in material claims, the client`s refusal of his counsel to bring the matter to the attention of the auditor, almost certainly require the removal of the lawyer from the employment relationship. in accordance with the Professional Liability Code. ( See, for example, Disciplinary Rule 7-102 (A)(3) and (7) and Disciplinary Rule 2-110 (B)(2).) A withdrawal in such circumstances is obviously not desirable and can cause serious problems for the customer. Therefore, in the context of financial accounting and reporting unforeseen losses arising from unclaimed claims, the standards of which are set out in FAS 5, clients should be required to disclose to the auditor information about an unclaimed potential claim or valuation (not otherwise expressly specified by the client) if the lawyer is clear in the course of the services provided to the client. has become that (i) the customer has no reasonable basis. to conclude that the assertion of the claim is not likely (using the concepts set forth herein) and (ii) given the likelihood of the assertion, disclosure of the contingency of loss in the Client`s financial statements is undisputed.

FASAB Interpretation No. 2 states that « the management of the federal unit, as recommended by the Department of Justice, must determine whether it is likely that a legal claim will result in a loss to the federal entity and that the loss is appraisable. » The DOJ is concerned that the wording of the interpretation may lead the authorities to conclude that the DOJ is the sole source of audit legal representation letters in cases where DOJ counsel are dealing with legal matters on behalf of other reporting federal agencies. The management of the Federal Declaration Unit and its Legal Department is responsible for providing a letter of legal representation to the auditor. The letter of legal representation must cover all disputes, claims and assessments relating to the Federal Information Office, including matters handled by the DOJ or other external legal counsel on behalf of the Federal Reporting Unit. (8) General. This policy statement, together with the accompanying commentary (which is an integral part of this press release), has been developed for the general direction of the legal profession. In individual cases, counsel may supplement or modify the approach set forth herein. If you wish, this statement of the directive can be incorporated by reference into the lawyer`s response by the following statement: « This response is limited by and in accordance with the ABA statement of the Directive on Lawyers` Responses to Auditors` Enquiries (December 1975); Without limiting the generality of the foregoing, the limitations set forth in this statement with respect to the scope and use of this response (paragraphs 2 and 7) are expressly incorporated herein by reference, and any description of « risk of loss » in this Agreement is limited in its entirety by Section 5 of the Statement and the accompanying commentary (which forms an integral part of the Statement). 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.