The recent decision in US v Textron Inc and Subsidiaries will have far-reaching implications for the treatment and discoverability of tax accrual workpapers prepared in reliance on advice provided by attorneys. While the court held that disclosure of risk of liability by a client's attorneys to an independent auditor for the purpose of developing tax accruals waived the attorney-client privilege, it did not waive the "work product privilege," which exists to serve a different public policy than the attorney-client privilege. In Textron, the court ruled that only disclosures by Textron that were inconsistent with keeping the information from an adversary would constitute a waiver of work product privilege. Textron had disclosed the tax workpapers only to its independent auditors, who gave Textron a pledge of confidentiality. The outcome of this case is an important barometer for gauging where the conflict in public policy values between the client, legal counsel, and the independent auditor is headed.
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