ACC Update - August 2, 2006 (Plain Text Version)CLO’s Role in Financial ComplianceCLO’s Role in Financial Compliance: Trusted Legal Advisor, Advocate & Leader
“Internal and outside auditors heavily rely on General Counsel and in-house lawyers when certifying the books and financial statements. While our participation in the audit process is increasing, our finance role is not limited to this function. We implement a variety of ‘preventive’ practices that help build trust and support the integrity in our financial processes, and this reinforces the value and important role lawyers play,” shares Fricklas. Among these practices are: • Be ‘in-the-loop’.
In-house lawyers need to be on top of the latest finance information in
the company so that they may proactively help spot issues and ask
questions during internal discussions. They should also be involved in
the process to help identify legal issues and ensure comfort with
external statements by senior management to the investment community.
Fricklas notes that his law department and senior management have
established practices that help enable the law department to be so
familiar with the numbers that they can provide advice on-the-spot, or
in advance of company announcements or management’s speaking
engagements.
• Establish collaborative relationships with company
financial staff and auditors that foster information-sharing with
minimal intrusion. Fricklas believes that, under most
circumstances, auditors don’t need access to privileged documents, and
companies can find an alternative way to support accounting positions
without risking the attorney-client and work product privileges. As an
example, Fricklas notes that business personnel can focus on fact-based
reasons supporting financial positions rather than focusing on advice
of counsel since most circumstances will necessarily involve fact-based
decision-making as justification for a given course of action.
• Hire lawyers who are financially literate and provide tools to support continued learning.
In-house lawyers working with inside financial personnel and outside
auditors need to stay current on significant accounting rule changes
and related financial rules to that they can stay plugged in to the
entire set of accounting processes and ask informed questions. But
even more fundamental, they need to have a good grasp of how the
company’s business and finances are connected, which many lawyers don’t
spend time focusing on. Within the Viacom law department, lawyers
attend an internal company ‘corporate college,’ and appropriate lawyers
receive advanced training that supports their relationship with
auditors and company financial managers.
• Communicate with the Board. In-house lawyers should
brief the full Board on significant litigation, and Fricklas attends
all meetings of the Board’s Audit Committee, including executive
sessions of the committee during which outside auditors are not
present. There is also an executive session attended only by the
Committee and himself as General Counsel.
• Help structure internal controls processes and certify the process.
At Viacom, in-house lawyers are deeply involved in quarter-end review
processes to help ensure the reliability of divisional certifications
of financial information submitted to Corporate. Since the role of
in-house lawyers focuses on providing assistance and process support,
select in-house lawyers working with the business divisions certify
their involvement with the process and whether it was followed.
• Separate facts and legal opinions in internal investigation reports.
Consider preparing separate legal and factual components of any
investigation report prepared so that the factual information may be
shared with outsiders, including auditors, while preserving legal
privileges and protections for the report that contains legal advice
and mental impressions.
• Meet with outside auditors and have open/honest discussions.
Lawyers take the lead in discussing the business impact of legal
matters in a manner that does not constitute waiver, including the
likely financial impact and the broader operational impacts of legal
affairs.
• Stay involved in the outside auditor inquiry letter process. The law department should be engaged with their auditor to help identify which outside law firms may have information on material matters and should therefore provide written responses to audit inquiry letters. Read the rest of this article. CLO’s Role in Financial Compliance: Trusted Legal Advisor, Advocate & Leader
“Internal and outside auditors heavily rely on General Counsel and in-house lawyers when certifying the books and financial statements. While our participation in the audit process is increasing, our finance role is not limited to this function. We implement a variety of ‘preventive’ practices that help build trust and support the integrity in our financial processes, and this reinforces the value and important role lawyers play,” shares Fricklas. Among these practices are: • Be ‘in-the-loop’. In-house lawyers need to be on top of the latest finance information in the company so that they may proactively help spot issues and ask questions during internal discussions. They should also be involved in the process to help identify legal issues and ensure comfort with external statements by senior management to the investment community. Fricklas notes that his law department and senior management have established practices that help enable the law department to be so familiar with the numbers that they can provide advice on-the-spot, or in advance of company announcements or management’s speaking engagements. • Establish collaborative relationships with company financial staff and auditors that foster information-sharing with minimal intrusion. Fricklas believes that, under most circumstances, auditors don’t need access to privileged documents, and companies can find an alternative way to support accounting positions without risking the attorney-client and work product privileges. As an example, Fricklas notes that business personnel can focus on fact-based reasons supporting financial positions rather than focusing on advice of counsel since most circumstances will necessarily involve fact-based decision-making as justification for a given course of action. • Hire lawyers who are financially literate and provide tools to support continued learning. In-house lawyers working with inside financial personnel and outside auditors need to stay current on significant accounting rule changes and related financial rules to that they can stay plugged in to the entire set of accounting processes and ask informed questions. But even more fundamental, they need to have a good grasp of how the company’s business and finances are connected, which many lawyers don’t spend time focusing on. Within the Viacom law department, lawyers attend an internal company ‘corporate college,’ and appropriate lawyers receive advanced training that supports their relationship with auditors and company financial managers.
• Communicate with the Board. In-house lawyers should brief the full Board on significant litigation, and Fricklas attends all meetings of the Board’s Audit Committee, including executive sessions of the committee during which outside auditors are not present. There is also an executive session attended only by the Committee and himself as General Counsel. • Help structure internal controls processes and certify the process. At Viacom, in-house lawyers are deeply involved in quarter-end review processes to help ensure the reliability of divisional certifications of financial information submitted to Corporate. Since the role of in-house lawyers focuses on providing assistance and process support, select in-house lawyers working with the business divisions certify their involvement with the process and whether it was followed.
• Separate facts and legal opinions in internal investigation reports. Consider preparing separate legal and factual components of any investigation report prepared so that the factual information may be shared with outsiders, including auditors, while preserving legal privileges and protections for the report that contains legal advice and mental impressions. • Meet with outside auditors and have open/honest discussions. Lawyers take the lead in discussing the business impact of legal matters in a manner that does not constitute waiver, including the likely financial impact and the broader operational impacts of legal affairs.
• Stay involved in the outside auditor inquiry letter process. The law department should be engaged with their auditor to help identify which outside law firms may have information on material matters and should therefore provide written responses to audit inquiry letters. Read the rest of this article.
Annual Meeting Offers Expanded Programming for CLOsACC’s Annual Meeting is offering more options than ever before—just for CLOs. A sell-out every year, ACC’s CLO Club is a sophisticated networking forum that hosts peer-to-peer discussion groups targeted to the unique executive practice, management, and benchmarking needs of chief legal officers in both small and larger department settings, across all industries. This year’s CLO Club will focus on identifying key challenges and best practices for such topics as law department metrics and working with the board of directors. The Club’s interactive discussion groups enable meaningful one-on-one dialogue and networking based on your department’s size: full-group follow-up allows for larger benchmarking opportunities against practices of all CLOs present at the meetings. Participation is strictly limited to chief legal officers.
Build Your Department with ACC’s In-house JoblineLooking for the next, great member of your legal team? Look no further than ACC’s In-house Jobline—the destination for corporate counsel career opportunities. In 2005, In-house Jobline delivered these results: ACC’s Latest Advocacy Efforts• ACC filed an amicus brief in In re Teleglobe Communications Corporation. In the case, Teleglobe, a subsidiary of BCE Inc., is suing BCE and demanding access to attorney-client privileged communications between BCE and its in-house and outside counsel on the grounds that BCE’s in-house counsel previously represented both the parents and subs on a variety of issues.
|