Lawyers' Responses to Accountants in Connection with Audits

THE BASIC ISSUE GOES BEYOND WHAT TYPES OF INFORMATION AUDITORS OUGHT TO GET FROM LAWYERS AND WHAT RESPONSES LAWYERS OUGHT TO BE WILLING TO GIVE. THE REAL ISSUE IS WHAT KINDS OF INFORMATION ABOUT LIABILITIES IN GENERAL AND CONTINGENT LIABILITIES IN PARTICULAR, OUGHT TO BE AVAILABLE TO READERS OF FINANCIAL-STATEMENTS. THE LAWYER'S LETTER HAS A CLEAR IMPACT ON THE AUDITOR'S REPORT. IF THE AUDITOR CONCLUDES THAT HE CANNOT GET ADEQUATE INFORMATION ABOUT A CLIENT'S CONTINGENT LIABILITIES, HE MAY CONCLUDE THAT THE SCOPE OF HIS AUDIT HAS BEEN LIMITED AND QUALIFY HIS OPINION FOR THAT REASON. IF HE CONCLUDES THAT HE HAS ALL AVAILABLE INFORMATION, ALTHOUGH MATERIAL UNCERTAINTY REMAINS, THIS WOULD NOT CONSTITUTE A LIMITATION ON THE SCOPE OF HIS AUDIT BUT MERELY A CONDITION APPLYING TO THE FINANCIAL STATEMENTS THEMSELVES. IT IS THEREFORE IMPORTANT FOR THE ACCOUNTING AND LEGAL PROFESSION TO REACH AN UNDERSTANDING WITH SEC AS TO WHAT MUST BE DISCLOSED WITH RESPECT TO CONTINGENCIES.