Solicitors told not to answer auditors' questions amid fears of huge liabilities

Accounts: Society awaits APB response and warns of negligence, privilege and costs issues

Auditors are persisting in asking solicitors non-specific questions which can expose law firms and their clients to massive liability, despite attempts by the Law Society to stop them, it emerged this week.

The Society's company law committee secretary, Steven Durno, said the questions - usually relating to litigation and regulation, and phrased in a catch-all manner - should be left unanswered by solicitors.

Solicitors who give answers risk being liable for any failure to identify all potential issues for which a company might later be found liable.Under a deal struck in 1970 between the Law Society and the Auditing Practices Board (APB), it was agreed that auditors should not ask, and solicitors should not answer, such questions.Last year, the Society complained to the APB of a series of breaches by auditors throughout the country - including Big Five auditor PricewaterhouseCoopers in Newcastle (see [2000] Gazette, 16 March, 8).At a subsequent meeting last December between the Society and the APB, the Society agreed tocollate examples of breaches, details of which were sent to the APB three weeks ago.At the December meeting, the APB indicated that it wished to review the 1970 agreement, and pointed out that in the US, lawyers with clients registered with the Securities and Exchange Commission are required by the American Bar Association to answer such questions.

Vanessa Knapp, a corporate partner at Freshfields and chairwoman of the City of London Law Society's company law sub-committee, said: 'In the US they recognise that their own practice is not the norm in other jurisdictions.

We have followed the Law Society's guidance and it hasn't caused us problems in the US.' Mr Durno said the Society is now waiting to hear back from the APB and warned that replying to such requests raises negligence, privilege and costs issues.

He added: 'The Law Society will continue torecommend that solicitors do not answer them.'Jeremy Fleming