Caution: Use this sample response in conjunction with the accompanying article “Best Practices in Responding to U.S. Audit Enquiries.”  To follow Best Practices, forward the draft audit response to your client for review before releasing the response to the auditor.

[Date]

Privileged and Confidential

[Auditor Name]
[Address]

Attention:

Dear Sirs/Mesdames:

               Re: [Company Name] (the “Corporation”)

This letter is in reply to the Corporation’s enquiry letter dated [date], a copy of which is attached.

We are unable to reply strictly in conformity with that enquiry, as we are a law firm qualified to practise only in the Province of [insert].  In particular, we are not qualified to advise the Corporation with respect to its obligations of financial disclosure in the U.S. under the Statement of Financial Accounting Standards No. 5 or otherwise.  In addition, our professional obligations may be different from those of U.S. attorneys. 

Accordingly, for the purposes of this letter:

“claim” means a matter involving the Corporation that is or is likely to become litigious and with respect to which:

(a) we have been engaged to represent or advise the Corporation;

(b) a demand or indication of demand has been communicated to the Corporation, carrying with it the possibility of future loss to the Corporation; and

(c) we have devoted substantive time and attention.

“possible claim” means a matter involving the Corporation that is or is likely to become litigious and with respect to which we have been engaged to represent or advise the Corporation and have devoted substantive time and attention, but with respect to which a demand or indication of demand has not been communicated to the Corporation.

“records” means records that we have prepared and currently retain in our active files, which, when reviewed, would be likely to bring to our attention the existence of a claim or possible claim.

“to our knowledge” means the actual knowledge of those lawyers currently in this firm who have performed services for the Corporation for the period **** to ****.  We have not made any other investigations, and in particular, we have not reviewed our files or conducted any searches in the public records of any court or other governmental agency.

Subject to the foregoing, and based on an examination of our records, we confirm that to our knowledge, there are no claims outstanding as of [effective date of response], [except for the following:]

               [Insert appropriate information]

With respect to possible claims, we cannot respond to a general enquiry relating to the existence or absence of possible claims; nor can we comment on the adequacy of the Corporation’s listing, if any, of possible claims.  We can provide information concerning only those possible claims on which the Corporation has specifically requested that we comment. 

This letter should not be quoted from or referred to in the financial statements of the Corporation or in dealings with third parties or filed with any governmental agency or other person without our prior written consent.

As requested by the Corporation, a copy of this reply is being provided directly to you solely for your information in connection with the audit of the Corporation’s financial statements.  We confirm that the Corporation does not intend, and we are not authorized, to waive privilege in respect of the matters addressed in this reply.

                                                                                       Yours truly,

Copy to: [Client]