Lawyers Letters

Question 0

Facts

Answer 0

Auditors should read all the minutes of meetings and examine charges in expense accounts and invoices

Auditor should draft a “letter of inquiry” for management to send all lawyers with litigations services

Lawyers response to letter of inquiry is lawyers letters. It’s purpose is to corroborate responses to the inquiries about legal related contingencies.

If it happens that a auditor doesn’t have any lawyer letter (2 reccommended) then that must be mentioned in the management representation letter and be stated that no legal counsel has to address the litigation issues

-lawyer cannot directly inform auditor about omission or unasserted claims

Management rep letter must state it lawyer has informed management about unasserted claims or omission

Question 1

AU 501

Answer 1

Audit evidence-specific considerations for selected items

Obtain sufficient appropriate audit evidence regarding the completeness litigation, claims and assessments involving the entity

Question 2

Scope limitation

Answer 2

A limitation to a lawyers response. Unqualified opinion.

Disclaimer=no response

A lawyer may appropriately limit the response to matters to which the lawyer has given substantive attention in the form of legal consultation or representation

Question 3

Audit procedures that an independent auditor would perform concerning litigation, claims, and assessments

Answer 3

Obtain assurance from management that it has disclosed all unasserted claims that the lawyer has advised that are probably of assertion and must be disclosed

Inquire about and discuss with management the policies and procedures adopted for identifying, evaluating, and accounting for litigation, claims, and assessments

Obtain from management a description and evaluation of litigation, claims, and assessments existing at the balance sheet date

Discuss with management the policies and procedures it had adopted for evaluating and accounting for litigation, claims, and assessments

Question 4

Client and auditor should always understand about materiality. The understand is then communicated to the attorney who will limit his or her response accordingly.

Answer 4

True

Question 5

What is a factor that can help identify litigation, claims, and adjustments?

Answer 5

Read the file of correspondence from taxing authorities. A taxing authority can impose an assessment on an entity related to tax matters.

Question 6

without merit

Answer 6

Highly unlikely that a materially unfavorable outcome will occur