Document ID: chunk:federal_register_of_legislation:F2021C01254:reg:5:p7
Version: federal_register_of_legislation:F2021C01254
Segment Type: reg
Provision Reference: reg 5 (pt 7/11)
Character Range: 23063–25992

should be exercised to ensure that conditions prevail which would make such reliance reasonable.

Aus A8.4 If a disagreement between management and legal counsel is resolved after discussions, the auditor would ordinarily request the entity's legal counsel to confirm the details in writing to the auditor.  (Ref: Para. Aus 5.2)

Aus A8.5 If the disagreement is not resolved, the auditor would ordinarily prepare a memorandum of the discussion and seek written confirmation from management and the entity's legal counsel that it is an accurate record of the discussion.  In conjunction with evidence from other audit procedures, the auditor, under ASA 705, needs to consider the effect of such disagreement on the auditor's report.

Aus A8.6 If the response from the entity's legal counsel contains information that requires clarification, the auditor would ordinarily make further enquiries of management and the entity's legal counsel, as appropriate, and request clarification in writing.

Legal Counsel's Inability to Respond Comprehensively or Limitations in a Response (Ref: Para. 6(a))

Aus A8.7 If a response is not received from the entity's legal counsel, or the response received is incomplete, the auditor would ordinarily consider:

(a) requesting management to contact the entity's legal counsel to either seek a complete answer to the original request, or an explanation for the lack of, or limitation in, a response, which ought to be sent directly to the auditor; or

(b) making arrangements to discuss with management or the entity's legal counsel the reasons for the lack of, or limitation in, a response.

Aus A8.8 Due to the following circumstances it may be difficult to either obtain a response to a letter of enquiry or be provided with information about litigation and claims from the entity's legal counsel:

(a) If the entity is involved in litigation, or litigation is anticipated or contemplated, relevant information about legal matters may be subject to legal professional privilege.  Disclosure of this information in the letter of enquiry, directly to the auditor for the purposes of the audit of the entity's financial report, is not privileged.  This may cause legal professional privilege attaching to the entity's communications with its legal counsel to be compromised, as information in the letter of enquiry might become discoverable in litigation proceedings.

(b) Factors influencing the outcome of a legal matter may sometimes not be within the legal counsel's competence to judge, for example where there is no relevant or historical experience of the entity or other entities in similar matters, or where the litigation is at an early stage.

(c) Due to material uncertainties, the entity's legal counsel may be unable to form a conclusion to corroborate management's representations regarding outstanding litigation and claims.

Alternative Audit Procedures (Ref: Para. 6(b))

Aus