A Lawyer's Response to a Letter of Audit Inquiry
Understanding a Lawyer's Response to a Letter of Audit Inquiry
Audit inquiries are typically sent by auditors to a client's lawyer as part of the audit process. These inquiries help auditors gather important information related to legal matters that may impact the financial statements of a company. Lawyers are expected to respond to these inquiries in a timely and accurate manner to assist auditors in their assessment of the client's financial position.
However, if a lawyer refuses to respond to a letter of audit inquiry, it poses a significant challenge for auditors. Without the necessary information from the lawyer, the auditor may not be able to verify the accuracy of the financial statements or assess the potential risks and liabilities facing the company. As a result, the auditor may have to issue a qualified opinion or a disclaimer of opinion on the financial statements.
A qualified opinion is issued when the auditor believes that the financial statements are generally accurate but includes a specific caveat or limitation due to the lack of information. On the other hand, a disclaimer of opinion is issued when the auditor is unable to express an opinion on the financial statements due to a lack of sufficient evidence or information.
Issuing a qualified opinion or a disclaimer of opinion is a serious matter as it signals to stakeholders that there are uncertainties surrounding the financial statements. It is important for auditors to communicate clearly the reasons for such opinions and the implications they may have on the company's financial credibility.
In some cases, auditors may try to reach out to the client's in-house attorney for additional information. While this may help fill some gaps, it may not always provide a complete picture or resolve the underlying issues prompting the lawyer's refusal to respond. Auditors must exercise professional judgment and diligence in managing such situations to uphold the integrity and accuracy of the audit process.