The past week has provided an illustration of the types of challenges the FRC and its successor body (the proposed Audit Reporting and Governance Authority or ARGA) may face increasingly frequently when exercising investigatory and enforcement powers.
In a judgment handed down last week, the Court of Appeal upheld a company’s challenge to a notice issued by the FRC purporting to compel auditors to produce certain documents. Specifically, the Court confirmed that documents covered by legal advice privilege were not required to be produced, whether the privilege belonged to the auditor or the audited entity.
If the client has no objection to the disclosure of his privileged material, he can waive his privilege at the request either of his legal adviser or of the regulator. The potential for waiver and the inability of the legal adviser to prevent his client from waiving privilege erodes, in my judgment, any justification for some different rules to apply depending on whose privilege is engaged.