Other Canadian Standards

Communications with Law Firms

Summary

Changes are required to the Handbook to deal with the various financial reporting frameworks (including IFRS) that may apply regarding contingencies related to litigation.

Staff Contact(s)

Svetlana Berger, CPA, CA, MAcc

Principal, Auditing and Assurance Standards Board

Meeting & event summaries


October 14, 2015

AASB Decision Summary – October 14, 2015

The AASB approved a revised “Joint Policy Statement Concerning Communications with Law Firms Regarding Claims and Possible Claims in Connection with the Preparation and Audit of Financial Statements” appended to CAS 501, Audit Evidence — Specific Considerations for Selected Items, as well as conforming amendments to CAS 501.  

The AASB concluded that changes made in finalizing the Joint Policy Statement were not significantly different from the proposals in the Exposure Draft and, therefore, no re-exposure is necessary.

The revisions will be effective for inquiry letters dated on or after December 1, 2016 and are expected to be reflected in an April 2016 Handbook update.

June 9, 2015

AASB Decision Summary – June 8-9, 2015

The AASB reviewed comments received from Canadian stakeholders on its Exposure Draft of a proposed revised “Joint Policy Statement Concerning Communications with Law Firms Regarding Claims and Possible Claims in Connection with the Preparation and Audit of Financial Statements” appended to CAS 501, Audit Evidence — Specific Considerations for Selected Items. Responses indicated strong support for the revised Joint Policy Statement. The AASB discussed issues including:

  • how to provide greater clarity in CAS 501 that the revised Joint Policy Statement applies to communications with in-house legal counsel acting in a legal capacity;
  • whether amendments should be made to address respondents’ concerns that it is not clear what the auditor’s work effort should be when using evidence provided by in-house legal counsel acting in a legal capacity; and
  • how to appropriately reflect in CAS 501 and the revised Joint Policy Statement the circumstances when an auditor may request communication with legal counsel in situations when there are no claims or possible claims.

The AASB expects to approve the final Joint Policy Statement at its October 2015 meeting.

January 12, 2015

Webinar – Joint Policy Statement Concerning Communications with Law Firms: Improvements Proposed

January 12, 2015. Tune in to this webinar on February 10, 2015 to learn about the Exposure Draft that was recently issued by the AASB and the JPS Review Committee of the Canadian Bar Association.

October 16, 2014

AASB Decision Summary – October 16, 2014

The AASB unanimously approved an exposure draft of a proposed revised “Joint Policy Statement Concerning Communications with Law Firms Regarding Claims and Possible Claims in Connection with the Preparation and Audit of Financial Statements” appended to CAS 501, Audit Evidence — Specific Considerations for Selected Items. The exposure draft is expected to be issued in late November 2014.

June 22, 2014

AASB Decision Summary – April 22, 2014

The AASB discussed issues related to its project to revise the “Joint Policy Statement Concerning Communications with Law Firms Regarding Claims and Possible Claims in Connection with the Preparation and Audit of Financial Statements” appended to CAS 501, Audit Evidence — Specific Considerations for Selected Items, including:

  • how privileged information related to claims and possible claims should be addressed;
  • the extent to which guidance relating to specific financial reporting frameworks should be included;
  • the law firm’s responsibilities when possible claims have been omitted from the inquiry letter;
  • the auditor’s responsibilities in the process of developing the inquiry letter;
  • responsibilities of the law firm and the auditor in the process of developing the response letter; and
  • the form and content of the inquiry and response letters.

The AASB reviewed a draft revised Joint Policy Statement, with a goal of approving an exposure draft at its June 2014 meeting.

June 10, 2014

AASB Decision Summary – June 9-10, 2014

The AASB discussed issues related to its project to revise the “Joint Policy Statement Concerning Communications with Law Firms Regarding Claims and Possible Claims in Connection with the Preparation and Audit of Financial Statements” appended to CAS 501, Audit Evidence — Specific Considerations for Selected Items, including:

  • whether the revised Joint Policy Statement should include illustrations of how the evaluation of claims and possible claims under different financial reporting frameworks could be described in the inquiry letter or whether such illustrations should be issued separately as non-authoritative guidance;
  • whether any consequential amendments would be necessary to CAS 501; and
  • what the effective date of the revised Joint Policy Statement should be and whether early implementation should be permitted.

The AASB reviewed a draft revised Joint Policy Statement, with a goal of approving an exposure draft at its September 2014 meeting.

December 3, 2013

AASB Decision Summary – December 2-3, 2013

The AASB discussed issues related to its project to revise the “Joint Policy Statement Concerning Communications with Law Firms Regarding Claims and Possible Claims in Connection with the Preparation and Audit of Financial Statements” appended to CAS 501, Audit Evidence — Specific Considerations for Selected Items, including whether:

  • the scope should be expanded to include in-house legal counsel acting in a capacity similar to external counsel;
  • the accounting framework should remain neutral; and
  • additional guidance should be added dealing with situations when possible claims are omitted from the inquiry letter.

The AASB plans to discuss a draft exposure draft at its March 2014 meeting, with a goal of issuing an exposure draft in 2014.

September 10, 2013

AASB Decision Summary – September 9-10, 2013

The AASB discussed issues related to its project to revise the “Joint Policy Statement Concerning Communications with Law Firms Regarding Claims and Possible Claims in Connection with the Preparation and Audit of Financial Statements” including:

  • redrafting the Joint Policy Statement such that the terminology used conforms with standards in the Handbook;
  • the timing provision of Assurance and Related Services Guideline AuG-46, Communications with Law Firms under New Accounting and Auditing Standards, which is largely not being followed by entities and their auditors in practice; and
  • a concern expressed by lawyers that inquiry request letters received are often incomplete or inappropriately prepared.

The AASB will continue to discuss these and other issues over the remainder of the year, with a goal of issuing an exposure draft in the first half of 2014.

September 15, 2009

AASB Decision Summary – September 14-15, 2009

The AASB reviewed and approved a project proposal to revise the “Joint Policy Statement Concerning Communications with Law Firms Regarding Claims and Possible Claims in Connection with the Preparation and Audit of Financial Statements.

News


April 1, 2016

Basis for Conclusions

Basis for Conclusions – Joint Policy Statement Concerning Communications with Law Firms Regarding Claims and Possible Claims in Connection with the Preparation and Audit of Financial Statements

April 1, 2016. This document summarizes the process followed in developing this Statement and the conclusions reached by the AASB and the CBA Committee regarding significant comments received in response to its Exposure Draft.

November 27, 2014

News

Exposure Draft – Joint Policy Statement Concerning Communications with Law Firms Regarding Claims and Possible Claims in Connection with the Preparation and Audit of Financial Statements

November 27, 2014. The AASB and the JPS Review Committee of The Canadian Bar Association have issued an Exposure Draft that proposes a revised Joint Policy Statement. Stakeholders are encouraged to submit their comments by April 6, 2015.

Disclaimer

This project summary has been prepared for information purposes only. Decisions reported are tentative and reflect only the current status of discussions on this project, which may change after further Board deliberations. Decisions to publish Handbook material are final only after a formal ballot process.