LAWYER’S LETTERS IN THE NETHERLANDS ANTILLES
A lawyer’s letter is for the purpose of reviewing management’s evaluations regarding claims
The management board of a Netherlands Antilles company has a duty to account to the shareholders’ meeting, which is embodied in the duty to draw up and submit the annual accounts and annual reports to the shareholders’ meeting. The general meeting (or another corporate body so designated by the company’s articles of association) may appoint an external accountant to regularly supervise the bookkeeping and to report to this meeting on the annual accounts.
One of the items the (chartered) accountant has to look into are unasserted claims and assessments. Litigation and claims involving a company may have a material effect on the financial statements and thus may be required to be disclosed and/or provided for in the financial statements. It’s the companies lawyer / attorney who customarily advises whether such claims and assessments are probable of assertion and must be disclosed as a possible loss.
A lawyer’s letter’s purpose is to provide for sufficient appropriate audit evidence as to whether potentially material litigation and claims are known and management’s estimates of the financial implications, including costs, are reliable. The lawyer’s letter is thus for the purpose of reviewing management’s evaluations and reporting directly to the auditors and either corroborating or disagreeing with those evaluations.
All lawyer’s letters are subject to qualifications, for example, that except as set forth in the letter, the company has not made available information about any material litigation, arbitration, claims or assessment concerning the company. Also, in most cases the lawyer / attorney cannot accurately predict the outcome of proceedings pending: uncertainties are involved in every litigation. But the letter serves as an instrument that assists the accountant in determining whether the management’s estimates of the financial implications are reliable.
Karel Frielink
Attorney (Lawyer) / Partner
