Jayme Vita Roso*

1. On 23^rd September 2006, The Court of Ethics and Discipline I, of the São Paulo Chapter of the Brazilian Bar Association had occasion to pronounce itself, three times, on legal auditing:

“E-3.369/06 – JUDGMENT Nº 1 – LEGAL AUDITING – THE CONTRACTING OF SERVICES BY COMPANIES CONTROLLED BY THE FEDERAL GOVERNMENT – PUBLIC BID – PARTICIPATION BY LAW FIRM – MULTIPLE SERVICES – UNDEFINED LEGAL CONSULTANCY OR SERVICES – INFRACTION, IN THEORY, OF THE PROVISIONS SET FORTH IN SECTION 1, § 3, OF LAW Nº 8.906/94. I. CHALLENGE – CASE AT ISSUE – NO GRANTING. II. REQUEST FOR ORIENTATION FORMULATED BY THE LEGAL DEPARTMENT OF THE BIDDING COMPANY TO SETTLE FUTURE CASES – ETHICAL NATURE – PARTIAL GRANTING – I. An inquiry formulated by a law firm relative to the repeated participation in a bid, with a request for guidance coming from the bidding company on the same subject, characterizes a case at issue together with the circumstance of the existence of a challenge. On the contentious case at issue, this Deontological Panel abstains from issuing an opinion. II. However, the other inquiry by the biding company, since it deals with orientation for future cases, must be granted, in this part. In light of the absence of a better definition of the tendered services, which involve multiple professional activities, the task of defining them falls exclusively to the bidding company so that invitations to bid may be sent only to those professionals from their respective lines of business in such a way as to prevent one professional from invading the private activity of another. Unanimous Vote, on 21/09/2006, of the opinion and judgment nº 1 of Reporting Justice Dr. BENEDITO ÉDISON TRAMA, with declared and concurrent vote and judgments nºs. 2 and 3 of the Honorable Dr. FÁBIO DE SOUZA RAMACCIOTTI – President Dr. JOÃO TEIXEIRA GRANDE.

E-3.369/06 – JUDGMENT Nº 2 – LEGAL AUDITING – EXPRESS REGULATION – NO REQUIREMENT – OF A LEGAL ADVISORY NATURE – ORIENTATION FOR LEGAL ENTITIES OF PUBLIC OR PRIVATE LAW ON THE CONSEQUENCES FOR THE LEGAL WORLD OF CERTAIN LEGAL FACTS, ACTS, FACTS, LEGAL ACTS IN THE STRICT SENSE, LEGAL ACTS AS ACTS OF HIERARCHY AND REGARDING LEGAL EXISTENCE, VALIDITY AND EFFICIENCY OF LEGAL BUSINESS – THE DRAWING UP OF REPORTS RELATIVE TO THE COMPLIANCE, OR NOT, BY CORPORATE PRACTICES WITH PREVAILING LAW – PRIVATE ACTS BY LAWYERS WHO HAVE THEIR OWN LEGAL PRACTICE OR WORK IN LAW FIRMS. Legal auditing, that is, the professional exercise that consists of the drawing up of an opinion or the execution of a judgment of legality, licitness, judiciality or subsumption to law of specific administrative or corporate practices (legal facts, legal acts, acts, facts and legal business), the identification of the legal norms applicable to a specific public or corporate activity, or further, the analysis and appreciation of the risk of specific legal actions underway or still to be filed, so that the client (or rather, the company under audit) has the exact dimension of the compliance of its corporate practices with statutory law, is an act exclusive to lawyers. Legal auditing, because it deals with a service that is consultative/advisory by nature, is an activity exclusive to lawyers or to law firms, regardless of the fact that it is not expressly contemplated in section 1 of the EAOAB - the Practice of Law and Brazilian Bar Association Act - and that it is not regulated by the Federal Council of Justice of the Brazilian Bar Association. Unanimous Vote, on 21/09/2006, of the report and judgment nº 1 of Reporting Justice Dr. BENEDITO ÉDISON TRAMA, with declared and concurrent vote judgments nºs. 2 e 3 of the Honorable Dr. FÁBIO DE SOUZA RAMACCIOTTI – President Dr. JOÃO TEIXEIRA GRANDE.

E-3.369/06 – JUDGMENT Nº 3 – LEGAL AUDITING – THE CONTRACTING OF SERVICES BY A COMPANY CONTROLLED BY THE FEDERAL GOVERNMENT – BID OR DISMISSAL OR UNENFORCEABILITY PROCEEDINGS THAT MUST LIMIT ITS UNIVERSE TO LAWYERS AND LAW FIRMS – MULTIDISCIPLINARY ACTIVITY OF LAW FIRMS OUTSIDE THE SPHERE OF THE KNOWLEDGE OF LAW – ETHICAL AND LEGAL PROHIBITION OF THE LAW FIRM TO PROVIDE ANY SERVICES OTHER THAN LEGAL ONES EVEN IF WITHIN THE SPHERE OF LEGAL AUDITING – THE CONTRACTING OF OTHER PROFESSIONALS – RESPONSIBILITY OF THE BIDDING AGENCY AND NOT OF THE LAW FIRM – ANALYSIS OF LEGAL PROCEEDINGS UNDER THE CARE OF ANOTHER COLLEAGUE – DUTY OF THE LEGAL AUDITOR TO ISSUE AN OPINION REGARDING THE RISKS OF THE LEGAL ACTION, WITHOUT CENSORING OR INSPECTING THE WORK OF ANOTHER COLLEAGUE – NECESSARY COMPLIANCE WITH SECTIONS 3, 4, 13, IN FINE, 22, 44 AND 45 OF THE CODE OF ETHICS AND DISCIPLINE AND 31, 32, 33 AND 34-IX OF LAW Nº 8.906/94 – RESPECT TO PROFESSIONAL CONFIDENTIALITY. A company controlled by the Federal Government that intends to contract legal auditing services should promote a bid or proceedings of dismissal or unenforceability aimed exclusively at lawyers and law firms. Law firms, however, may not render services pertinent to any other line of business except that of the practice of law. Law firms may only be multidisciplinary with regards the various branches of the law and not in such a way as to encompass non-legal services and/or services that fall exclusively into the sphere of other regulated professions, pursuant to section 16 of the EAOAB - the Practice of Law and Brazilian Bar Association Act. In analyzing legal proceedings under the care of another colleague, the legal auditor should not act as a censor or inspector, but rather shall only issue a judgment relative to the risks of the legal action. Required compliance with sections 3, 4, 13, in fine, 22, 44 and 45 of the Code of Ethics and Discipline and 31, 32, 33 and 34-IX of Law nº 8.906/94, always respecting professional confidentiality. Precedents of The Court of Ethics and Discipline-I: proceedings nº E-3.324/2006. Unanimous Vote, on 21/09/2006, of report and judgment nº 1 of Reporting Justice Dr BENEDITO ÉDISON TRAMA, with declared and concurrent vote and judgments nºs. 2 and 3 of the Honorable Dr. FÁBIO DE SOUZA RAMACCIOTTI – President Dr. JOÃO TEIXEIRA GRANDE”.

Doctor Fábio Kalil Vilela Leite had previously made a pronouncement on the subject:

“Declaration of concurrent vote:

The inquiry that was made has opened up the opportunity for reflection on a theme that concerns thousands of lawyers working in the corporate field, either as service providers or as employees, but it is not unprecedented.

In fact, 11 years ago, in September 1994, this Court approved by a unanimous vote judgment nº 1.145, set forth in vol. 111, pgs. 232, of the "Court Decisions of the Court of Ethics and Discipline – São Paulo Chapter of the Brazilian Bar Association", handed down by the virtuous reporting justice, Dr. José Urbano Prates, and by the reviewing judge, Dr. Benedito Édison Trama, today Dean of the Deontological Court and reporting justice of this inquiry.

The judgment was written down thus:

E - 1. 145 - Judgment - Lawyer – legal auditor - "The non-existence of such a figure as true “censor”, with autonomy to oversee attitudes and professional work of other retained colleagues – Since lawyers are free and responsible for the orientation and technical management of legal actions, such interference harms the duties of solidarity and fraternity that unite this professional class in its choice of legal means and in the way its professional work is conducted. Lawyers should never permit that there be direct or indirect relief for their client by third parties or by a judge. Lawyers should not make judgment on legal actions they know to have been given to other lawyers without knowing the grounds of the opinion or the attitude of those same lawyers, without being in their presence or having their prior and express consent (CEP, Section 11, letter "c"). Intelligence of section 133 of the Federal Constitution, sections 6°, 7, indent I, and 18 of Law n° 8.906/94 and section 87, inc. XIV, letter "A" of revoked law n° 4.215/63".

Nowadays, Legal Auditing is deserving of a more extensive ethical focus, distinguishing different situations that are not at variance with each other, but rather, can and should be integrated.

Medium- and, in particular, large-sized legal entities are submitted to internal and external controls at least annually, but it is not uncommon for them to do so 2 or 3 times a year, when detailed examinations of their financial positions are performed, conducted by Auditing companies, composed originally of accountants but which, nowadays, hire professionals from other fields, including the legal field.

These audits, using methodology exclusive to the field of accounting, seek to gather information from the different departments of the company being audited that exposes the financial position of such company, the results of the administration thereof, the detection of errors and/or fraud, among dozens of other things that, in the end, contribute to the preparation of the balance sheet, which assists in the taking of countless economic decisions demonstrating the financial "health" of the company, the assessment of the management of the company and the strategies to be adopted, among other measures.

It is unnecessary to say that investors and shareholders, before performing any business transaction, will study in depth the audit reports before taking any decision, which is why such reports are so important.

Because auditing is multidisciplinary, since it covers all the sectors of a company, it must not fail to audit the legal department, and, consequently, not only the legal proceedings of interest to such department, but also contracts, policies of a labor, social security, tax and corporate nature, amongst others, because at any given moment these will be translated into profits or losses, their importance and influence therefore being predictable when calculating the balance sheet.

Once such premises are established, all that remains is to think about is the reconciliation between the essential examination of the legal area that is part of any audit and how to perform such examination and still respect the regulations set forth in the company’s articles of association and its prevailing ethical standards and, furthermore, upon which professional the task to audit the legal area will fall.

We understand that only a lawyer or bachelor-at-law may qualify for such a task given that legal auditing is a discipline within the practice of law. This is a thesis that we sustain, having been consolidated after the unprecedented study by the learned Doctor, Dr. Jayme Vita Roso, one of the luminaries of the practice of law in Brazil, in his work "Auditoria Jurídica para a Sociedade Democrática" (Legal Auditing for a Democratic Society), published in 2001, Escolas Profissionais Salesianas.

Putting into words his renowned experience not only in the field of corporate law, but also his attachment to professional ethics and to the exercise of the practice of law, this jurist lapidated the concept of legal auditing, when he professed:

"(...) “Legal auditing is work that may be done exclusively by a lawyer in the regular exercise of his profession, through prior written engagement, pursuant to law, to operate the review of cases or to proceed with the evaluation of one or more concrete situations that are presented to him, within the sphere of law, in order that he may issue, in both eventualities, and in due compliance with legal and ethical principles, his opinionative assessment” (page44).

Upon analyzing the economic decisions to be taken grounded in the audited results, he exemplifies:

"a) decide when to buy, keep or sell an investment in shares;

b) assess the direction of the company and the rendering of accounts by the Management;

c) assess the capacity of the company to pay and provide its employees with other benefits;

d) assess the security of the financial resources lent to the company;

e) determine its fiscal policy;

f) determine distributable profits and dividends;

g) prepare and use national income statistics;

h) regulate the activities of companies" (page. 38).

The legal auditor, Jayme Vita Roso, upon addressing ethical questions, says:

"Lawyers, when they exercise auditing, in truth should make prevail the high designs of their profession in such a way as to ensure that Law may serve democracy and the destiny thereof, in the quest for personal happiness. When exercising auditing, no tolerance may be had with regards the ethical rules. One should not even accept any leniency. The ethical imperative of the exercise of the profession should prevail. And the rules that govern the profession did not result in a spontaneous creation, but rather have been sedimented down over the centuries." (...) (page 89)

"The so-called cooperation agreements, which are already springing up among companies controlled by organizations of consultants, or the organization of companies controlled by international consultancy organizations that use figureheads to cover up their control, constitute an unspeakable circumventing of the Brazilian Bar Association and the Code of Ethics and Discipline. It is lamentable that some lawyers participate in such purposes and functions, thereby sullying their oaths and their commitment to the profession". (page. 92)

It is obvious, therefore, that in modern times the auditing/practice of law relationship cannot be ignored, being, as it is, a concrete reality and deserving, by the Brazilian Bar Association, of the normatization of the activity of legal auditor and the establishing of legal parameters to be followed by legal auditors and by those lawyers who are being audited, especially since it involves a multidisciplinary activity, as was recommended by Doctor Jayme Vita Roso above, who even prepared a proposal of a specific Ruling.

While the subject is still not adequately normatized, all that may be done is to interpret it based on case law, as Dr. Benedito Édison Trama, wisely as always, was to do with his vote, where he established both ethical and statutory standards that must be rigorously complied with where legal auditing is concerned, determining, on the one hand, respect for liberty and independence of conduct, as per section 2, 11, sections 4, 26 and related ones of the Code of Ethics and Discipline, and on the other, that the auditing lawyer limit his work to the gathering of data that are relevant to the audit, avoiding making judgments of value as to the legal work in itself performed by his colleagues.

The importance of the vote handed down by the Dean is unquestionable, because it establishes a new direction, reflecting not only on the current reality by also shining light onto this new labor opportunity for lawyers: the market of legal auditing.

Suggestion of Judgment:

LEGAL AUDITING – THE EXAMINATION OF DOCUMENTS AND LEGAL PIECES BY AUDITORS – A POSSIBILITY, PROVIDED ETHICAL AND STATUTORY PARAMETERS ARE COMPLIED WITH - LIMITS.

Since auditing of the legal area exist, lawyers, be they an employee or self-employed, a private individual or a legal entity, without losing their technical independence, should provide the required information and handle carefully information of a confidential nature.

Lawyer auditors, on the other hand, should respect the professional independence of their colleagues under audit, abstaining from issuing a judgment of value as to the legal work in itself, but rather restricting themselves to the collection of data that are relevant to the audit.

The purpose of this declaration of vote is to praise the opinion of Dr. Benedito Édison Trama and to bring another opinion of agreement, thereby stimulating debate and reflection.

Guaratinguetá, 15^th December 2005.

Fabio K. Vilela Leite”.

The idea of regulating legal auditing is beginning to gain consistency because it deals with decisions that will become part of the history of the recognition of legal auditing as an activity exclusive to lawyers or law firms, an opinion upheld by us since the publication of Legal Auditing for Democratic Society, after its defeat by the Federal Council of the Brazilian Bar Association (Proposition nº 0043/2002/COP).

2. And, it is precisely because the reviewing justice of the proceedings, Doctor Fábio de Souza Ramacciotti, believes its regulation by the Federal Council of the Brazilian Bar Association to be indispensable, that the same theme is brought up.

2.1. At the proceedings of the Federal Council, which denied it, we had already presented our suggestion of how it would work, under the mantle of a regulation arising from the same source, with the following proposal:

“Recommendation

By virtue of the diverging interpretations with respect to the function of legal auditing with the joint exercise of multidisciplinary activities, which is forbidden by the EOAB (Brazilian Bar Association Act) but understanding that legal auditing should be an activity exercised exclusively by lawyers, the express manifestation of the Federal Council of the Brazilian Bar Association is recommended, to which ends this Specific Ruling template is proposed, so that the exercise of the activity of legal auditor might be disciplined.

“Proposal

Specific Ruling n. ..., …………..(date).

Provides for the institution of legal auditing and on the disciplining thereof.

The Federal Council of the Brazilian Bar Association, exercising the powers that are granted it by section 54, of Law n. 8.906, of July 4^th 1994, bearing in mind that it is set forth in Proceedings n. ..., establishes:

Section 1 Legal auditing is accepted into the sphere and the activities provided in section 1, II, of the EOAB, (the Brazilian Bar Association Act), as an activity exclusive to the practice of law in the area of consultancy, advisory services and legal direction, and such activity should be practiced exclusively by lawyers or by law firms that are not interested in the activities set forth in section 1, I, of the EOAB, and this peculiarity is obligatorily required to be provided in the articles of association of the law firm or noted in the professional registration and identity book and in the professional file, in the case of lawyers in private practice.

Section 2 Legal Auditing may only be exercised by lawyers that are properly enrolled in the Brazilian Bar Association, as owners of a private practice or as partners in a law firm when such law firm exercises nothing but auditing.

Sole paragraph – Lawyers who are employed by or connected to a company through a service provision agreement or are employed by or connected to a law firm are forbidden to exercise legal auditing to those with whom they are related, respectively, as an employee or as a contracted service provider. This activity is forbidden to foreign law firms associated to Brazilian law firms, and the exercise of legal auditing by a lawyer or a law firm that is not enrolled in the Regional Chapter of the Brazilian Bar Association specific to the purpose of the exercise of this activity, with exclusivity, shall constitute a grave disciplinary infraction.

Section 3 The exercise of legal auditing may be performed in jobs that require professionals in other activities to ensure the good performance of such jobs and to obtain those results necessary to the duty of auditor in general, but the legal auditor shall not be permitted to exercise such activity at the same offices, but rather he must do so in a separate place.

First paragraph. For the exercise of this multidisciplinary activity, lawyers or law firms must follow the stipulations below:

a) they must always contract in writing, establishing the work to be performed by the legal professionals, who should exclusively adhere to the limits and the precepts of the exercise of their profession, and inquiries by telephone, the performance of any other activity in parallel and the entering into of legal pacts involving on-duty services by phone or fax are forbidden;

b) co-participation in, or the division of, fees with professionals from other areas that are hired to perform the same job is strictly forbidden;

c) they must strictly comply with all the prescriptions of the Ethics Code in their relations with their clients, including informing them of any risks of the job and the consequences to which they may be connected when they issue their report or certificate and that may arise for their client;

d) they may be professionally, civilly and criminally held liable if they, in any way, sponsor an act that results in social damage or violates the norms of the EOAB and COED (Code of Ethics and Discipline), in the exercise of legal auditing;

e) in the exercise of legal auditing, they must rigorously observe professional confidentiality throughout the entire performance of work that has multidisciplinary participation; and

f) any publicity that passes "legal auditing” off as anything other than as a practice exclusive to lawyers or law firms is forbidden.

Second paragraph. The Chapter of the Brazilian Bar Association where the auditing company is headquartered may, whenever there is a suspicion of irregularities, determine the performance of an accounting audit or any other, to be paid for by whomsoever is under investigation.

Section 4 The organization of multidisciplinary legal auditing companies by areas of exclusive expertise that obey the following procedures is allowed:

a) the duty of lawyers should be limited, in no uncertain terms, to that which has been empowered to them by the Brazilian Bar Association and it shall be governed by deontological and fundamental rules with regards obligations and procedures, and each lawyer should adhere to the activity that he intends to execute with exclusivity;

b) in the office, the restricted space for each auditing area must be clearly marked, defined and reserved, and in such area shall be stored all related documents and files, given that this space is inviolable pursuant to law.

Section 5 The multidisciplinary company shall have its own by-laws, which shall be defined by the Federal Council of the Brazilian Bar Association, which must, obligatorily, be submitted to the Regional Council of the Brazilian Bar Association in whose territorial base the company is headquartered for prior examination.

Section 6 The conclusion of the legal auditing work shall compulsorily be performed with the preparation of a report or opinion or certificate. This document binds the lawyer or the law firm that produced it and, in this latter case, the document must be produced by a professional or by a partner that worked in the execution of the report.

First paragraph. Legal auditing shall always be done in writing, and it is forbidden to deliver the conclusive report by fax, telex or any other similar means.

Second paragraph. The contracting of legal auditing that consents to the provision of services by oral means only is forbidden.

Third paragraph. Lawyers or law firms that exercise legal auditing are forbidden to practice any other act that induces or could induce a conflict of interests; in cases of doubt, such doubt should be submitted to the local Chapter of the Brazilian Bar Association where the fact occurred so that it may be settled, or be submitted to the venue where the principal activity is located and enrolled at.

Fourth paragraph. The exercise of legal auditing in more than three Brazilian states is forbidden to lawyers or to law firms, and this practice must be regulated by the Federal Council of the Brazilian Bar Association.

Article 7 This Specific Ruling becomes effective on the date of its publication, and any provisions to the contrary are revoked.

Brasília, DF, ................(date)

Signatures”.

Although in agreement with the institution of legal auditing, the Reporting Judge of the proceedings of the Federal Council, lawyer Luiz Antonio de Souza Basílio, in 2003, handed down his vote without objecting to its regulation. He did, however, make some minor adjustments as to the future wording of the text, thus:

“I VOTE

From the outset I dare to summon the eminent Federal Councilors, the ex-Presidents (Permanent Members), and the eminent Councilors who make up the Management of the Entity, so that we may reflect patiently upon the theme, with a view to creating and institutionalizing legal auditing as an activity to be exercised exclusively by lawyers, in conformity with the proposal of our eminent and talented colleague Jayme Vita Roso, from São Paulo.

Faced with the nucleus of the question, it is important to point out that Law n° 8.906 of 1994 – of the EOAB, (the Brazilian Bar Association Act), provides in section 1, that the following are activities exclusive to the practice of law:

"II – the activities of consultancy, advisory services and legal direction".

On the institutionalization of legal auditing I consider it opportune to record the lucid manifestation of the eminent public men Paulino Cícero de Vasconcellos and Luiz Mareio Vianna, contained in the preface of the work of the proponent:

"The thesis is completed by a set of recommendations that would lead to the regulating of the exercise of this new and fascinating field of the practice of law by the national institution that regulates and oversees the profession of lawyer in Brazil, the ever-patriotic Brazilian Bar Association" (page 15).

The question thus put, I glimpse the possibility of considering legal auditing as one more category in the exercise of the practice of law, that may be conceptualized as an expansion of legal consultancy and advisory services, an understanding that I accept and adopt in line with the proposition.

It faithfully complies, moreover, with the deontological norms contained in the Code of Ethics and Discipline.

Along these lines, professional confidentiality will necessarily have to be preserved, such confidentiality constituting a principle inherent to the exercise of the practice of law, pursuant to the provisions set forth in the Code of Ethics and Discipline, sections 25, 26, 27 and sole paragraph thereof.

Aware of professional confidentiality, the legal auditor, as the exerciser of the practice of law, is compulsorily subordinated to section 1 of the Code of Ethics and Discipline that "requires conduct compatible with the precepts of this Code, with the Statute and the General Regulations and the other principles of individual, social and professional morals."

With regards the deontological norms, I incorporate into my present vote the opportune reflections coined by the illustrious proponent lawyer:

"Therefore, the art of the practice of law cannot, when applied to legal auditing, remain equidistant from the ethical principles of the profession, expressed in the deontological rules that must regulate the conduct of he who is involved in this activity, much less can it inhibit the creativity of those who seek, within the law and professional ethics, to create a new opportunity of work for lawyers.

6. In recent years, the practice of law and the exercise thereof has been undergoing various and tormented transformations, arising from the norms determined by globalization, through the rules of the World Trade Organization (WTO), and by the undeniable development of telecommunications, above all by the internet, as a catalyzing element for business and for the expansion of markets. Therefore, it is in the obscurity of his job that the lawyer will set his sights on the deontological rules of the profession and make them the guiding light of his life, which is the reflection of the elevated public duty that he exercises.

7. In the field of fiscal auditing, where there is marked specialization given the variety of interdisciplinary knowledge that must be applied, the job of the legal auditor acquires greater dimension because not only does it contribute to improving democratic institutions, the Law and laws, it will also show that, for example, it is only through systematic combat, by means of detection, that illicit financial and exchange-related activities may be staunched. The haemorrhaging caused by such acts, in the 80s and 90s, mitigated the growing poverty of the Brazilian people, hence the importance of the legal auditor in the detection and the task of attacking illicit practices.

……………………………………………………………

9. There is no doubt that the Fiscal Responsibility Law now requires that administrators manage public funds with a seriousness and prudence to which they are not accustomed. In this public segment, the independent legal auditor may serve as a legal councilor in the following-up and execution of performances dictated by the new legislation, above all because, with his reports, he will be bound to the information and will be answerable pursuant to law (section 71, EOAB), even though he must always seek to uphold his liberty and independence (section 4, sole paragraph, of the COED – Code of Ethics and Discipline)."

Still on this fascinating theme, and also because of the duties of office, I inform the Plenary Session that the São Paulo Section of the Brazilian Bar Association “denied the existence of services that could be rendered by lawyers as legal auditors”, as, in fact, the illustrious Proponent acknowledges and records on page 8.

I dare to diverge, data venia, from such honorable São Paulo Section of the Brazilian Bar Association.

This, because, if we admit as valid such understanding, the following question arises: if not a lawyer, then who will be legitimized to exercise legal auditing? Perchance bachelors-at-law not enrolled at the Brazilian Bar Association!?? If we are to go down this doomed path, in this line of thinking, legislative bills to regulate a new profession will not be long in coming. It seems to me that, for those who give legal courses, such an alternative would be taken as an unending source of exploitation that, if conquered by such course-givers, would represent a harsh blow to the practice of law and to the Corporation of Lawyers.

The Brazilian Bar Association, currently, has a planetary countenance, being, as it is, bound to the most expressive Associations of similar ilk and international entities.

In the contemporary world and as concerns comparative law, I observe that legal auditing has for a long time been very consolidated and institutionalized elsewhere, as the publishing of “Auditoria Jurídica” (“Legal Auditing”) by Hector Charry illustrates, published in Buenos Aires, 1997, which I found in the Library of the Superior Court of Justice.

The newspaper Gazeta Maercantil, in the edition of 26.09.2002, published an advertisement on a “course of labor auditing” administered by SESCON –SP (The Union of Accounting Companies – São Paulo Branch) and AESCON – SP (The Association of Accounting Companies – São Paulo Branch).

I recognize that the exciting theme is not pacific, but I believe it is necessary to dare, in the legitimate quest for this area for professional work. "Legal Auditing” must be conceptualized as an activity to be exercised exclusively by lawyers before it is too late…….

To conclude, I vote for the approval of the recommendation of the eminent lawyer Jayme Vita Roso. In honor of the illustrious proponent I accept and adopt, with a few provisos, the draft of the specific ruling that accompanies the proposition. The Plenary Session, with all its wisdom and discernment, at the appropriate moment, will improve the document.

After all, given the undeniable complexity of the subject, I am for designating a Reviewing Councilor, together with the distribution to the Plenary Session of the draft of the Specific Ruling that accompanies the proposal and of the other elements available in the proceedings, including the work of this reporting justice.

The examination of the Specific Ruling will be subject to the manifestation of the Plenary Council on the merits of the proposition.

This is how I think and how I vote.

Brasília (DF), February 2003.

Luiz Antonio de Souza Basilio – Conselheiro Relator

3. And, mention must also be made of Deputy Raul Belens Jungmann Pinto’s (PPS-PE) presentation, on April 5^th,of a bill to regulate legal auditing, which was given nº 6.854, and from which are extracted his motives, as set forth below:

“1. The origin of the word auditor comes from the ancient classic Greek (aisthánesthai = to perceive). It underwent extensive evolution, varying its meaning for different senses and functions. In Anglo-Saxon practice it came to be officially recognized as meaning profession, and nowadays it is most well known as such.

2. The activity of auditing professionals has undergone, thanks to globalization, radical transformations, and the work of solo auditor is at the brink of extinction. From another angle, the mergers and amalgamations between global companies has reduced the number or participants and has cartelized the exercise of the profession. The regulatory authorities have issued norms of conduct, taking as their parameter the work of the American entities (SEC - Securities and Exchange Commission NYSE - New York Stock Exchange and ASE - American Stock Exchange). Legal auditing exercised by lawyers is a modern-day activity that should not only be stimulated but also exercised by qualified professionals and have the endorsement of the Brazilian Bar Association, which must regulate it. Legal auditing will contribute to the improvement of democratic institutions as from the moment in which the lawyer ceases to be a mere spectator and becomes a player in social reform, given that he will be responsible for that which he affirms in his report.

3. It is a well known fact that the new Economy above all provoked a real revolution in the practice of corporate law, going through the necessary specialization and demanding greater control over the conduct of the administrators, bearing in mind that the lawyer auditor is the defender of the Democratic State of Law and will only survive if citizenship is respected and exercised and public morality is upheld. From this perspective, new challenges and paths open up, with the legal auditor working in varied and various segments.

4. In recent years, the practice of law has been going through various and tormented transformations arising from the rules that have arisen from globalization by the norms of the World Trade Organization (WTO) and by the undeniable development of telecommunications, above all the internet, as a catalyzing element of business and the expansion of the markets. Therefore, in the obscurity of his job, the lawyer sets his sights on the deontological rules of his profession and makes them the guiding light of his life, which is a reflection of the elevated public function that he exercises.

5. In the field of fiscal auditing, where specialization is marked by the variety of interdisciplinary knowledge that must be applied, the function of the legal auditor acquires more dimension because not only does it contribute to improving democratic institutions, the Law and laws, but it will also show up, through systematic combat via detection, the financial and exchange-related illicit activities that were seen the 80s and 90s.

6. There is no doubt that the Fiscal Responsibility Law now requires that administrators manage public funds with a seriousness and prudence to which they are not accustomed. In this public segment, the independent legal auditor may serve as a legal councilor in the following-up and execution of performances dictated by the new legislation, above all because, with his reports, he will be bound to the information and will be answerable pursuant to law (section 71, EOAB), even though he must always seek to uphold his liberty and independence (section 4, sole paragraph, of the COED – Code of Ethics and Discipline)."

7. Lawyers must render accounts of their professional acts, some of their duties being to denounce suspicious practices and regulate their conduct through prudence, whereas legal auditing, reserved for lawyers by the Bill in question, will connect those duties to the professionals that exercise the activity, orienting and providing their clients with all the information they require to compy with legal stipulations.

8. Given the importance of the regulation of the activity of legal auditing presented herein, I request the support of my noble peers in approving this present Bill.”

This Bill is being duly processed, but if the distinguished Federal Council were to decide to regulate legal auditing without reading the words of this scribe, it would provide a great chance for opening up new long-sought-after possibilities for the free exercise of the profession of lawyer.

4. Although the arguments of the eminent lawyer Fábio de Souza Ramacciott are consistent, the absence of regulations could make the fulfilling of the purposes and objectives of legal auditing fade away. We often see borne out in the modern globalized world the fact that (de)regulation provokes greater evils than operating with defined rules. It is for this reason that, within the objective of freeing bureaucracy from its shackles and preventing any more detours from being taken, which is natural to the human condition, especially the contemporary condition, regulatory agencies arose.

4. It would be an exaggeration to allow the practice to be unrestricted in the belief that lawyers, per si, would not abuse the freedom given them. Regulation is necessary, not to orient lawyers in the exercise of their profession in compliance with the requirements that the Brazilian Bar Association Act or the Ethics Code prescribe, but rather to be guiding, and vigilant. So much so, that the actual judgments set forth have already become part of the coherent exercise of our work, as far as lawyers are concerned.

Legal auditing is differentiated work that, demanding in itself, from the outset, will open up opportunities for the anointed; but regulated, it may be administered through professional courses and reach an expressive universe.

If, to finalize, legal auditing were not regulated, we would lapse into the refrain: “Who will audit the legal auditors?” To hope that the Disciplinary Commission would do so or that the Court of Ethics and Discipline would clarify this point, in the opinion of this scribe, would be to transcend the limits of the efforts that the honorable colleagues make to the benefit of the profession and, worse still, would be to lead the idea that is beneficial to the oxygenation of the exercise of the practice of law to the grave of illusions and utopias constructed without grounding in reality.

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*Attorney at Jayme Vita Roso Advogados e Consultores Jurídicos