lawyer's letters

Question 1

Understand procedures the auditor would perform related to legal liability issues.

2. Understand the agreement between the AICPA and American Bar Association regarding matters that can be communicated to the auditor in the “lawyer’s letter” in response to a “letter of inquiry” (with emphasis on “asserted” and “unasserted claims”).
3. Be familiar with the language used in a typical “letter of inquiry to legal counsel.”

Answer 1

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Question 2

what is the purpose of the lawyer inquiry letter

Answer 2

the purpose is to corroborate managements responses to the auditors enquiries by obtaining the attorney’s reply
(known as lawyers letter or attorneys letter). try to get a reply toward the end or field work. (for issues past yr end)

Question 3

two categories of legal matters

unasserted claims

Answer 3

asserted claims- pending or threatened litigation (filed a lawsuit or planning to do so)

unasserted claims- no one has stepped forward to sue or claim to sue but the company is exposed in some way or another and people may.

Question 4

agreement between auditor (aicpa) and Lawyer ( bar association)

asserted claims

unasserted claims

Answer 4

asserted claim
if there is an omission of an asserted claim , the attorneys will inform the auditors directly about any such commission

unasserted claim
attorneys will not agree to inform the auditors directly of any omission of an unasserted claim. this is potentially a problem to the auditors because gap requires that an unasserted claim that is probable of assertion and reasonably possible of a material unfavorable outcome must be disclosed under gap. lawyers won’t inform auditors but they will inform management.