Request unbilled legal fees without estimating from a budget

Send outside counsel a request for fees and disbursements relating to services performed through the reporting cutoff. Identify the entity, matter reference, currency, and invoices already received. Ask for the basis of any estimate and whether amounts are billed, unbilled, disputed, or still being reviewed. A total matter budget does not establish the cost of services performed by period-end.

Coordinate the request with the person responsible for the legal relationship. Counsel may need a secure channel or may be unable to provide detailed narratives broadly. Agree the level of detail necessary for accounting without requesting unnecessary sensitive information. The accounting reviewer needs the service period and supported amount even where the underlying matter description remains restricted.

Maintain separate lines for professional services and the potential outcome of the legal matter. A law firm's estimate of unbilled work is not an estimate of settlement exposure. PCAOB AS 2505 addresses evidence concerning litigation, claims, and assessments in covered audits; that process should not be replaced by a routine vendor balance request.

Ask whether a retainer, credit, or advance has already been recorded, then provide the relevant terms to the accountant. Do not automatically reduce expense by the cash paid into a retainer arrangement. The nature of the payment and services performed determine the accounting analysis. Keep gross fees, amounts already invoiced, and amounts already paid visible until the reviewer approves the treatment.

Use the response to separate billed work from unbilled work and work after cutoff. In an illustrative response, counsel reports $18,000 of September services, including $7,000 already invoiced. If the approved ledger contains that $7,000 once, the remaining September amount for assessment is $11,000. Verify that the response and recorded invoices cover the same matter and currency.

PCAOB AS 2501 treats methods, data, and assumptions as components of an accounting estimate in its audit requirements. For this internal estimate, retain the counsel response, invoice reconciliation, and any management assumption. If no response arrives, document the alternative evidence and its limitations for the accounting owner rather than presenting an unsupported budget allocation as confirmed work.

A single matter can involve several firms, and one invoice can cover several matters. Keep firm and matter references distinct. Check whether a coordinating firm includes subcontracted work in its response while the subcontractor also responds directly. Confirm the contractual billing arrangement before combining amounts. Otherwise the same service can enter the estimate twice.

Record the person who confirmed the response and any outstanding exclusions, such as taxes, disbursements, or work awaiting partner approval. Have the accountant determine the accounting treatment of those components. A precise-looking total is not complete if its scope excludes a known category that the ledger needs to assess.

When the invoice arrives, compare its service period and matter detail with the estimate before clearing or reversing the balance. Separate additional work from changes in price or earlier estimation. Preserve the original response and explain the variance. Ask the accountant to determine the period for any adjustment under the company's reporting circumstances.

Use repeated differences to improve the next request. If counsel routinely supplies only a budget, agree a more useful service-period response. If invoices combine several entities, obtain a supported allocation before the close. The final workpaper should show which legal services were considered, what remained unbilled, and how later evidence resolved the estimate.