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L19 Notes_Part_3 - 4 Can’t rely on in-house legal counsel...

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Attorney letter: Lawyer Inquiry SAS #12 Venture Capital Group Firm A $.5MM contingency accrual Firm B $2MM contingency accrual Purchase price based on audited F/Ss Subsidiary ‘X” $27MM in assets Outside Legal Counsel (73 pending/threatened legal actions) Sub X Gen. Counsel Lawyers’ Letters “Lawyers’ Letters”
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1. Analyze the client’s legal expense account noting names of attorneys. 2. Inquire with management about attorneys used throughout the year 3. Attorney’s letter are not sent to all attorneys (e.g., skip those used to collect bad debts), since the purpose is to corroborate evidence about legal claims and assessment during the year. 4.
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Unformatted text preview: 4. Can’t rely on in-house legal counsel because they lack knowledge of the case and how the attorney intends to respond. On the other hand, the client’s attorney may not respond completely. Why not? • Lack of privileged protection since CPA’s working papers can be subpoenaed. • Auditors and attorneys interpret “probably” differently • Negative forecasts of client outcomes might actually be self fulfilling particularly if it finds its way, in some form, into the auditor’s report • Failure of the attorney to respond would suggest a disclaimer of opinion since the effect is generally pervasive. Attorney letter: Lawyer Inquiry...
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