SEC Staff Letter on Use of Clarifying Language in UK Audit Opinions

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February 28, 2003

VIA FACSIMILE

Mr. Peter Wyman President The Institute of Chartered Accountants of England and Wales Chartered Accountants' Hall PO. Box 433 Moorgate Place London EC2P 2BJ ENGLAND

Dear Mr. Wyman:

This is in response to your letter and our subsequent meeting on the use of clarifying language in United Kingdom (UK) audit opinions. We understand that, in response to a recent court decision in Scotland, you are advising your members to include certain language in their audit opinions for UK companies, with the view to clarifying the parties to whom the auditors owe a duty of care and avoiding unintended liability to third parties who may seek to rely on the audit opinion. Your communications with us focused on the impact of this advice on UK companies that also file reports with the Commission containing audit opinions signed by UK auditors. Specifically, you have asked for our views on the inclusion of similar clarifying language in audit opinions contained in filings with the Commission.

As we discussed, audit reports contained in Commission filings are intended to be general use reports rather than restricted reports, and we would not accept a filing that contained an audit opinion prepared in accordance with U.S. generally accepted audit standards (GAAS) that contained the clarifying language. We understand that you may seek to expand the clarifying language in the auditors' UK opinion with a view to limiting reliance by third parties on opinions of the same auditors, relating to financial statements for the same periods, that are issued in jurisdictions outside the UK. The wording of the UK audit opinion is an issue of UK law and practice that you will, no doubt, be discussing with your UK counsel. Our primary concern is that annual reports filed by foreign private issuers on Form 20-F (or reports of other registrants filed with the Commission) contain an unrestricted audit opinion in accordance with US GAAS.

Companies that file reports containing audited financial statements in both the UK and the US will need to address issues such as presentation and incorporation by reference that are raised by the existence of both a UK and US form of audit opinion. In no circumstances, however, should an audit opinion containing restrictions, such as the UK form of audit opinion, be included as part of, or incorporated into, the annual report on Form 20-F or any other report filed with the Commission. We suggest that companies with questions relating to those issues call our office or the Division of Corporation Finance to discuss their specific proposals for addressing those issues. In addition, companies will need to consider the listing requirements of the relevant U.S. securities exchanges and the NASDAQ Stock Market.

Sincerely,

Jackson M. Day Acting Chief Accountant Office of the Chief Accountant

Alan L. Beller Director, Division of Corporation Finance

http://www.sec.gov/info/accountants/staffletters/icaew022803.htm

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Modified: 02/28/2003