April 11, 2008
Sarbanes-Oxley Auditing Requirements Erode Attorney-Client Privilege
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Summary: Dorsey partner William Michael discussed with the Bureau of National Affairs (BNA Inc.) the growing conflict between auditors and their corporate clients over auditor requests for confidential documents on issues that could affect the company's bottom line. Well-established confidentiality rules such as the attorney-client privilege and the work-product privilege have traditionally protected communications between lawyers and clients, as well as a lawyer's written impressions, conclusions, opinions and research, from disclosure to adverse parties. Following the imposition of stronger audit documentation requirements, particularly under the Sarbanes-Oxley Act of 2002, auditors have started requesting material that could be considered confidential.
Michael said companies face a "tremendous dilemma" when asked by auditors to disclose confidential material. By waving their rights to the privileges, companies face a series of collateral consequences, including the prospect that in a criminal investigation "all information gathered by lawyers can be subpoenaed." However, refusing to grant a waiver may cause auditors to withhold certification of the company's financials, which could cause the company to miss its filing deadline and risk delisting from the stock exchange.
"Attorneys Say Auditors Do Not Need Privileged Information to Provide Attestation" was published by BNA, Inc., April 11, 2008. Republished with permission.