(From time to time I find myself spelunking down various risk rabbit holes. Sometimes nothing comes of that. Sometimes there’s treasure. Sometimes it’s in between.)

Looking at some statistics, I observed that audit letter response (past posts) has actually been an area of healthy reader interest over the years. So I took a drive along the information highway to see if there were any fresh materials of note. Found some fresh and some older but still interesting examples I thought I’d share today.

I also found a job posting from a 1000+ law firm looking to hire for an audit letter analyst position specifically, so that was another interesting data point for my risk radar. According to the always completely scientific LinkedIn search, there are at least 20 individuals (on LinkedIn) working at law firms comprising at least 200 individuals with “audit letter” in their actual job titles. Though ~90% of those are at firms comprising 1000+ individuals. Make of all of this what you will. I think it’s all fascinating. (Hence the rabbit hole.)

For those interested other materials on the topic, see:

2021 Presentation: “Audit Response Letters and Disclosures: Counsel’s Role in Balancing Auditor Demands and Company Privileges” —

• “This CLE course will guide counsel for responding to external auditor inquiries concerning their client’s litigation, claims and assessments, and related financial reporting and disclosures. The panel will explain best practices for providing information regarding ‘pending or overtly threatened’ legal claims in audit response letters and updates without compromising the client’s privileges and confidentiality.”
• “Accountants conducting external audits of a company’s financial statements and related disclosures must ask the company for information about “pending or overtly threatened” legal matters, including litigation and government investigations. However, the longstanding ABA Treaty between the legal and accounting professions contemplates that attorneys providing this information will limit their discussion of these matters to protect attorney-client privilege and the company’s litigation position.”
• “In recent years, auditors have pushed for information from attorneys beyond the ABA Treaty, and counsel must deal with more difficult issues in their responses to audit letters. When responding to auditors, counsel must act carefully and strategically. This includes an internal inquiry to determine what to disclose in the response, setting a mutually agreed-upon dollar amount threshold for materiality, including a confidentiality clause in the audit engagement letter.”
• “Listen as our authoritative panel discusses recent trends in audit response letters and the complicated legal issues counsel must navigate in determining what to disclose in their responses.”
• “Outline:
  • Latest trends in audit response letters
  • External audits: duties of auditors and attorneys
  • Attorney-client privilege issues with audit response letters
  • Best practices for responding to auditor inquiries”
• Thankfully, for those who just want the PDF of materials, those are linked on the summary page above, and available here.

2019 Presentation: “Audit Response Letters and Disclosures: In-House Counsel’s Role in Balancing Auditor Demands and Company Privileges.” While the title and outline are the same as above, the actual course materials include: “In-House Counsel: Considerations for Interacting with Auditors,” which goes into greater detail.

And it’s in the 2017 version of that resource from the even earlier version of that session (available here, with standard caveats that often updates, edits and removals are done for a reason) includes a specific story of law firm audit letters playing a role in a DOJ matter: SEC v. RPM International Inc., Case 1:16-cv-01803 (D.D.C. Sept. 9, 2016):

• “In this case, the SEC alleges that RPM, as a result of conduct by Mr. Moore, failed to timely accrue for and disclose a loss contingency related to a government investigation arising from a sealed qui tam complaint. Although the SEC’s complaint does not assert any scienter­based claims, it nonetheless seeks to leave the misleading impression that Mr. Moore committed “fraud.” It does so by taking statements out of context; understating the complexity, nuance and ambiguity of the accounting standards at the heart of this case; and omitting inconvenient, yet relevant, facts from documents on which it otherwise relies, including the following:
  • An independent investigation by RPM’s audit committee, relied upon and cited in the SEC’s Complaint, found no evidence of intentional wrongdoing, fraud, or indeed any unlawful conduct, by Mr. Moore or anyone else at the Company;
  • Mayer Brown, the law firm handling the investigation for RPM, did not believe that the matter constituted a disclosable loss contingency during the period in question, a view conveyed in its quarterly audit response letters to RPM’s auditor, Ernst & Young (“EY”);
  • In a communication described only in part in the Complaint, the U.S. Attorney’s Office asked RPM and Mr. Moore not to disclose the existence of the sealed qui tam complaint or the related government investigation allegedly giving rise to the loss contingency;
  • There was no material impact on RPM’s share price after the contingency was accrued for and disclosed; and
  • Mr. Moore did not obtain any benefit, monetary or otherwise, from the alleged delay.”

In my journey, I also spotted that a year ago WilmerHale won another award (complimenting its earlier ILTA finalist honor) from The American Lawyer: “The American Lawyer Recognizes WilmerHale With Best Use of Technology Award.” So, belated congrats to that team —

• “WilmerHale was named the winner of the Best Use of Technology Award at The American Lawyer Industry Awards in recognition of the firm’s work to create an almost fully automated workflow to respond to client audit letters. The annual award recognizes the firm that has implemented technology to either improve the delivery of legal services, improve efficiency in internal or client-facing operations, or improve work-life balance.”