Management furnishes the independent auditor with information concerning litigation, claims and assessments. Which of the following is the auditor's primary means of initiating action to corroborate such information?
A) Request that client management engage outside legal counsel to suggest wording for the text of a footnote explaining the nature and probable outcome of existing litigation, claims and assessments.
B) Request that client management send a letter of general inquiry to those lawyers with whom management consulted concerning litigation, claims and assessments.
C) Request that client lawyers undertake a reconsideration of matters of litigation, claims and assessments with which they were consulted during the period under examination.
D) Request that client lawyers provide a legal opinion concerning the policies and procedures adopted by management to identify, evaluate and account for litigation, claims and assessments.

Question

Quizplus · Accepted Answer

The auditor's primary means of corroborating information related to litigation, claims, and assessments is to request that client management send a letter of general inquiry to those lawyers with whom management consulted concerning these matters. This allows the auditor to obtain independent confirmation of the information provided by management and understand the nature and current status of any ongoing litigation, claims or assessments. Option A is incorrect because it involves engaging outside legal counsel to suggest wording for the text of a footnote, which may not provide any additional substantive information. Option C is incorrect because it is not practical to ask client lawyers to completely reconsider previously consulted matters during the period under examination, especially if the matters are complex and involve a significant amount of legal analysis. Option D is incorrect because it is focused on obtaining a legal opinion on the policies and procedures surrounding the identification, evaluation, and accounting of such matters, which may not provide sufficient corroboration of specific information related to litigation, claims, and assessments.

Management Furnishes the Independent Auditor with Information Concerning Litigation, Claims