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7 Transactions: Tenn. J. Bus. L. 143 (2005-2006)
Talkin' 'Bout My Litigation - How the Attorney Response to an Audit Inquiry Letter Discloses as Little as Possible

handle is hein.journals/transac7 and id is 149 raw text is: TALKIN' 'BOUT MY LITIGATION - HOW THE ATTORNEY RESPONSE TO AN AUDIT INQUIRY LETTER DISCLOSES AS LITTLE AS POSSIBLE M. Eric Anderson* I. INTRODUCTION Lawyers and accountants are different professionals in many ways. For accountants, most of their work is black or white. In providing services to a client, an accountant must comply with a wide array of rules concerning a client's financial accounting and tax reporting. Compliance with accounting principles and auditing standards is just one of the items an accountant must evaluate in reviewing a company's financial statements. In addition, an accountant's client must comply with voluminous and highly complex tax laws. Most of these standards set forth the right way to account for any given financial statement item. While an accountant must still use professional judgment in estimating such items as bad debt reserves or depreciation allowances, the rules are fairly black and white for a majority of financial accounting decisions. For example, balance sheets must balance at the end of the day. The accountant must perform a search for unrecorded liabilities and make an accrual for any unrecorded amounts discovered. An accountant works hand in hand with the client to produce accurate financial statements. For lawyers, however, things have always been greyer. For every cause of action, there are two sides to the story. Two lawyers, looking at the same set of facts, will make a different argument concerning liability depending on whether they sit on the plaintiff's or defendant's side of the courtroom. In addition, lawyers exist in an inherently adversarial environment. While a trial might clearly evidence this two-party conflict, business transactions also require an attorney to pursue his client's needs at the expense of the other side. Whether in a trial or transactional setting, lawyers guard their clients' confidences vigorously and avoid disclosure of key information to any other party. Therefore, an attorney's reluctance to disclose any meaningful information in his or her response to an audit inquiry letter is understandable. In the context of responding to an audit inquiry letter, an attorney's * M. Eric Anderson, B.S., summa cum laude, University of Tennessee; Master of Accountancy, University of Tennessee; J.D., magna cum laude, The University of Tennessee College of Law; is an associate with the Knoxville office of Kennerly, Montgomery, and Finley, P.C. He concentrates his area of practice in general business and corporate law, taxation, and wills and estate planning. Mr. Anderson is also a Certified Public Accountant licensed in Tennessee and practiced for five years with local public accounting firms in Atlanta, Georgia, and Knoxville, Tennessee, prior to his study of law.

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