Scott Ewart​

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Traditional reviews of legal departments and/or process simply focused on ensuring legal invoices were properly documented. This is a typical control function but does not focus on the true issue of budget size and Organizational risk.

 

The scope of review should be expanded to include both legal departments and/or process because Legal:

• Dramatically affects the legal risk profile of an Organization

• Controls large budgets for Internal and External Legal Costs

• Often works with no defined Mission, Strategy, Tactics or Accountabilities

• Process is not historically reviewed by Audit Committees or Internal Audit

• Is usually on the back foot to defend budgets and it is virtually impossible for the person acquiring legal services to do self surgery or be self critical.

 

It is generally accepted that risk assurance is now assuming a much greater prominence with Boards of Directors. Audit Committees are now asking for highly reliable business and controls assurance across the business. As a result, Internal Audit is beginning to review high risk, big - ticket, strategic areas. With the size of legal budgets and the amount of risk legal manages, legal process can be considered a “high risk, big-ticket strategic area”. Audit Committees and Internal Audit are uniquely positioned to provide an objective appraisal of this area of cost and risk.

 

As a result:

• Audit Committees should focus on legal departments and/or process to ensure:

  • The retention of external counsel is both defensible and competitive

  • A major area of Organization risk is independently reviewed

  • There are proper controls surrounding significant legal budgets

  • A Legal Department is the right size for the Organization

• Internal Audit Departments should focus on Legal Departments and/or process to:

  • Focus on major areas of the Organization’s expenditure - external legal fees

  • Drive internal and external legal costs down and improve Legal Cost Efficiency

  • Ensure the process for the retention of external counsel is defensible and competitive

  • Ensure the proper legal cost controls are in place

  • Assist in creating a legal functional business plan linked to Organization’s goals to improve efficiency