Document ID: chunk:federal_register_of_legislation:F2021C01254:reg:5:p6
Version: federal_register_of_legislation:F2021C01254
Segment Type: reg
Provision Reference: reg 5 (pt 6/11)
Character Range: 20356–23337

of the identified litigation and claims and its estimate of the financial implications, including costs involved; and

(c)                A request that the entity's external legal counsel confirm the reasonableness of management's assessments and provide the auditor with further information if the list is considered by the entity's external legal counsel to be incomplete or incorrect.

Aus A7.1 An example of a letter of specific enquiry is included in [Aus] Appendix 1.

Aus A7.2 An auditor may in some cases request that management send a letter of enquiry to the entity's legal counsel who are not identified as currently handling the entity's litigation and claims.  For example when the entity has changed legal counsel on a particular matter, or when legal counsel engaged by the entity has resigned, the auditor would consider the need for enquiries concerning the reasons for the change or resignation.

A8.             In certain circumstances, the auditor also may judge it necessary to meet with the entity's external legal counsel to discuss the likely outcome of the litigation or claims.  This may be the case, for example, where:

           * The auditor determines that the matter is a significant risk.

           * The matter is complex.

           * There is disagreement between management and the entity's external legal counsel.

    Ordinarily, such meetings require management's permission and are held with a representative of management in attendance.

In‑house and/or External Legal Counsel (Ref: Para. Aus 5.1)

Aus A8.1 If both in‑house and external legal counsel are involved in advising the entity on the same litigation and claims, the auditor would ordinarily seek a letter of enquiry from the legal counsel with the primary responsibility for that matter.  However, there may be circumstances where the in‑house legal counsel has primary responsibility, but the matter has involved substantial participation by an external legal counsel, and is of such significance that the auditor would consider obtaining a letter of enquiry from the external legal counsel to determine that their opinion does not differ materially from that of the in‑house legal counsel.

Aus A8.2 In circumstances where both in‑house and external legal counsel have devoted substantial attention to litigation and claims involving the entity and primary responsibility rests with the external legal counsel, evidence obtained from an in‑house legal counsel is not an adequate substitute for any information that the external legal counsel may refuse to furnish.

Legal Counsel's Response

Aus A8.3 Before relying on the opinion of either in‑house legal counsel or external legal counsel, care 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