The Legal “CoFfEE” to Accounting’s “TEA”
Continuous (external) audit processes wouldn’t be complete without some way to gather enough information about an enterprise’s commitments and contingencies to limit the risks of material misstatement.
Only because I am obsessed with acronyms and mnemonics, and because a continuous accounting environment (the theory of which was published five years before Bitcoin) is called “Triple Entry Accounting” (or TEA), I’ve decided to call this continuous capture and reporting environment for commitments and contingencies “Coffee”: COntingency Filesystem for External Evidence.
I’m not saying it will be easy to capture all of this information for the filesystem, and there is usually far less cooperation around legal proceedings than there are for trade transactions. It’s difficult enough to get periodic legal representation from internal/in-house (ISA 580) and external (ISA 501) counsel. There are many issues here, where client-attorney confidentiality is only one. A system that exposes all issues that an enterprise (say Company XYZ) refers to its attorneys is only part of the picture; without an “outgoing” system that also tracks issues that other enterprises refer to their attorneys involving Company XYZ, and that information is not in a single shared system. Add to that the convention that corporate policy doesn’t permit public discussion or disclosure, as that may have “a substantial likelihood of materially prejudicing an adjudicative proceeding in the matter.”
Now the world may be ready for tea before the coffee’s ready, but it is important for decision makers to understand there might be some major surprises.
Comments
- No comments found
Leave a comment