Texas Wesleyan Law Review

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The American Bar Association's (ABA) long-standing compromise' with the American Institute of Certified Public Accountants (AICPA) regarding the role of lawyers in audits of public companies needs an overhaul. The current process is dysfunctional: accountants attempt to opine on a company's disclosures about litigation and to assess loss exposure without any foundation in the legal issues involved. During this process, those accountants turn to their clients' attorneys for help. But lawyers, concerned about preserving confidentiality and privilege, routinely respond to the accountants' requests with verbiage honed to say nothing at all. This Comment argues that the time has come to divorce CPAs from the task of evaluating legal risks in the course of their audits. Instead, an Independent Legal Counsel should report on the company's disclosure of legal matters. The benefits of this approach are: (1) to eliminate ineffective and unproductive handoffs under the current audit processes; (2) to avoid troubling attorney-client privilege risks during the background discussions of the legal contingencies; and (3) to improve public confidence in the legal disclosures made in financial statements.



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