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THE NEW JPS:

WHAT IN-HOUSE COUNSEL SHOULD KNOW

WHAT IS THE JPS? The CBA, in collaboration with the Auditing law frm. The auditor may also have discus-
and Assurance Standards Board (AASB), has recently made sions with the client and in-house counsel
or law frm if counsel disagrees with or is
much-needed updates to the Joint Policy Statement on Audit unclear regarding the client’s evaluations
Inquiries (JPS), effective for inquiry letters dated on or after upon receipt of the inquiry letter.
December 1, 2016. IN-HOUSE COUNSEL OR THE LAW
FIRM is responsible for:
1. Potentially answering questions from
he JPS establishes communication Other updates to the JPS aim to resolve the client about the drafting of the in-
protocols for when a client’s auditor concerns expressed by the legal profession
Tasks for information from its lawyers about communication protocols with au- quiry letter;
(in-house or external) about claims and ditors, particularly regarding the timing 2. Acknowledging receipt of the inquiry
possible claims by or against the client. of inquiries and responses. letter;
These protocols are intended to balance
the need for suffcient audit evidence and Roles under the JPS 3. Checking its records to identify claims
the imperative to protect confdentiality The process for responding to an audit and possible claims involving the client;
and privilege. The new JPS enhances the inquiry is identical whether the client is 4. Communicating with the client if there
ability of both auditors and lawyers to represented by in-house counsel or ex- are possible claims omitted from the
discharge their professional responsibili- ternal counsel. In-house counsel receives inquiry letter to ensure the client is
ties in this regard. the inquiry letter from the client’s man- aware of its obligation to disclose pos-
agement and has the same responsibilities sible claims;
How do the updates for the JPS affect to respond to the inquiry letter as would
in-house counsel? external counsel. The roles of each of the 5. Communicating with the client if it
disagrees with or is unclear regarding
Among the more signifcant changes is parties to the process are set out below. the client’s evaluations;
the express inclusion of in-house counsel,
recognizing their important role in client THE AUDITOR determines whether it is 6. Responding to the inquiry letter with its
necessary to send an audit inquiry letter to
matters. This inclusion recognizes that, in assessment of the client’s evaluation of
2016, in-house counsel often act for their in-house counsel or the law frm to collect the listed and possible claims, and speci-
suffcient appropriate audit evidence.
client in litigation matters instead of ex- fying any outstanding omitted claims by
If so, the client is responsible for draft-
ternal counsel. ing the inquiry letter, including the de- the response date indicated in the letter
As the purpose of the JPS is to protect (usually fve business days after the ef-
privilege and the authority of in-house scription and evaluation of claims and fective date of response) or by another
possible claims by and against it (with
and external counsel to claim privilege on agreed upon response date; and
behalf of their clients in appropriate situ- respect to estimated gain or loss), in ac-
cordance with the requirements of the 7. Providing an updated response to the
ations, these changes aim to strengthen inquiry letter, if requested, by the re-
the understanding that in-house counsel, applicable fnancial reporting framework. sponse date indicated, which is also fve
The auditor reviews the inquiry letter
as legal advisers, have the same duty and business days after the effective date of
ability to claim privilege as lawyers in pri- for compliance with the JPS and the ap- response unless circumstances warrant
plicable fnancial reporting framework
vate practice do.
before it is sent to in-house counsel or the an earlier response.

38 CCCA MAGAZINE | WINTER 2016 HIVER