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Joint Policy Statement (JPS) on Audit Inquiries

Regulatory Standard Edition: May 2024 | Published: April 23, 2024

The Ontario Bar Association would like to draw attention to the Joint Policy Statement (JPS) on Audit Inquiries, which addresses communication between lawyers and auditors in the performance of an audit engagement. The JPS clarifies the roles of the lawyer, the client and the auditor in the preparation of the client’s financial statements.

Among other things, the JPS acknowledges that law firms normally require five business days after the effective date of the response to prepare a letter. Any abridgements of that five-day period should be in exceptional circumstances, which are to be outlined in the letter.

The joint statement provides:

The auditor will request management to prepare an inquiry letter that includes the following elements:

…

(h) A statement that acknowledges that the law firm will normally require five business days after the effective date of response to prepare the letter; or, where the requested response date is within a period of less than five business days from the effective date of response, the letter will include a statement that the response date requested is within a period of less than the typical five business days from the effective date of the response and a description of the circumstances that give rise to such request.

In determining the feasibility of an abridged time period, consider that a number of people with limited availability must provide a response and that several steps are involved in preparing the firm response, including:

Generating a list of all client matters that are responsive to the inquiry. This can include affiliates, such as subsidiaries whose financial statements are consolidated with those of the entity being audited, as well as joint client matters where one of the joint clients is the entity being audited.
At the end of the “[effective] as of” date, identifying the lawyers who have worked on the client's matters over the last two years.
Communicating the audit inquiry to all those who have worked on the client’s matters.
Preparation of the response by those lawyers who have worked on the client’s matters and necessary follow-up to ensure a full response.
Consolidated and determining all matters that should appropriately be listed
Drafting the response letter.
Contacting the client with respect to matters not listed to determine if they would like to re-issue the letter.
Ensuring clients understand what matters are listed.