The Gazette 1973

Company Audits—Auditors' Enquiries The Society has been in consultation with the Institute of Chartered Accountants as to the information which may be required by an accountant from a solicitor in connection with the audit of a company which is a client of the auditor and the solicitor. In the past solicitors have been receiving from auditors fairly de- tailed enquiries as to possible liabilities of the company known to the solicitor concerned which ought to be included as a liability in the company accounts. Solici- tors have been reluctant to answer these enquiries be- cause of the possible legal liability which might accrue from any error or omission and the difficulty of ascer- taining at any given time with any reasonable degree of accuracy the actual or contingent liabilities of the company for which the solicitor acts. the following letter. From: Client (Name and Address) To: Solicitor (Name and Address) Date Dear Sir(s), Re : Balance Sheet at (1) In connection with the preparation and audit of our accounts as at the date mentioned above the direc- tors of the Company have made estimates of the amounts of the ultimate liabilities (including costs) which might be incurred, and are regarded a smaterial, in relation to the matters set out in Schedule 1, on which you have been consulted.

The Society and the Institute in dealing with this matter have had regard to two desirable aims, first that the solicitor should comply as far as possible with the reasonable requirements of the accountant and supply any information within his knowledge which ought to influence the auditors in certifying the com- pany accounts or matters to which attention should be drawn in the accounts and, secondly, the avoidance of liability for error or omission and the simplification of the work as far as possible in the solicitor's office. It is of course realised that solicitors in dealing with this matter should render the maximum service as efficiently as possible to enable the auditors to prepare and certify the accounts in accordance with the Com- panies Acts. With this end in view the following form of letter has been agreed between the Institute and the.Society. It will be noted that— the letter is from the client to the solicitor, the estimates of liabilities are submitted by the directors of the company to the solicitor and he is asked to state whether or not he agrees with them, if the solicitor disagrees with the directors' estimate he inserts his own figures, the solicitor is asked to give an estimate of the costs and outlay due to him at the audit date and the amount of monies held by him on behalf of the company at the same date. It is expressly stated that the estimates are given or accepted on the basis that the solicitor will not incur any liability for loss or damage suffered by any person in the event of the estimates being incorrect. The Council are of the opinion that solicitors may safely comply with auditors requirements on the basis of (1) (2) (3) (4)

We should be obliged if you would confirm that in your opinion these estimates are reasonable and, where you take a different view, please insert your own estimate. If you leave any of the directors' estimates un- changed, it will be taken that you agree with the same. It is agreed that any estimates given or accepted by you are given or accepted on the basis that you will not incur any liability whatever for any loss or damage which may be suffered by any person by reason of any such estimates being incorrect either on the basis of facts presently known or facts subsequently coming to light. (2) Would you please estimate in Schedule 2 the amount of costs and outlay due or accrued to you by the Company as at the balance sheet date, together with your costs for dealing with this query form, so far as is possible without necessarily drawing a bill of costs and without any commitment on your part to the amount so estimated. (3) Would you please indicate in Schedule 3 the amount of any monies held by you on behalf of the Company as at the balance sheet date. (4) This letter and form are submitted in duplicate. Please retain the copy and send the completed original direct to our Auditors :

Yours faithfully,

Director/Secretary

Form No.

Auditor's Address

Auditor's Name

Client's Address

Client's Name

Audit period .ended

Directors' Estimate £

Solicitors' Estimate £

Schedule 1—Estimate of liabilities Matter

l

Schedule 2—Costs and outlay accrued due by client at the balance sheet date (estimated) Schedule 3—Monies held by Solicitor on

£

£

behalf of client

Signed

Date

Solicitors

175