Audits and Adversaries: Making Disclosures to Your Auditors Without Waiving Your Privilege

May 1, 2017

When reviewing a corporation’s financial statements and internal controls, independent auditors frequently request copies of materials that were prepared for ongoing or anticipated litigation.

Auditors may wish to examine reports from internal investigations, legal opinions addressing potential liabilities, or presentations about prospective litigation prepared for the board of directors, among other materials.  Indeed, it is becoming more and more common for auditors to conduct their own “shadow investigation” of a company’s internal investigation and, as part of that shadow investigation, to request access to the internal investigation’s underlying work product:  the collection of documents that the company’s lawyers have deemed “key,” the analysis of transactions tested by forensic accountants working at counsel’s direction, and notes from interviews conducted by counsel in the course of the investigation.  Auditors may make similar requests when investigating the possibility of “illegal acts” at a company, as required under Section 10A of the Securities Exchange Act of 1934. Click here, to continue reading on the Cleary M&A and Corporate Governance Watch blog.