Solicitors bar accountants' request for litigation alert

GUIDANCE: Law Society rejects audit plan as too general

Solicitors have blocked the efforts of accountants to require them to take action if their clients have not disclosed the existence of 'a significant matter of litigation' to auditors.

The Law Society's company law committee has rejected a request from the Institute of Chartered Accountants in England and Wales that the existing joint guidance on audit enquiry letters should require solicitors who become aware that significant matters involving litigation have not been disclosed by clients to their auditors to draw this to the attention of the client.

Under the institute's proposals, solicitors should consider ceasing to act if the client does not disclose the litigation.

Solicitors would not be expected to take any further steps beyond their 'normal internal reporting procedures' to discover whether any such matters exist.

Steven Durno, secretary of the company law committee, said it had strongly rejected the move.

A key objection was that information which one lawyer within a firm has might not be available to others.

It was also concerned about the definition of the trigger for the proposal.

It may not be clear, the committee said, whether a solicitor would be expected to be aware of the matter, or the extent to which enquiries should be made to dig it out or ascertain its significance.

The committee also said there was nothing in the international audit standard that required a change in existing practice.

Committee member Jeffrey Sultoon, a partner with City firm Ashurst Morris Crisp, said 'lawyers can't know everything about the client company', and added that the accountants' request was too general.

The institute is now considering its next step.

Jeremy Fleming