Which of the following procedures might be useful in discovering a contingent liability for a lawsuit that management is intentionally neglecting to disclose?
A)inquiries (orally and in writing)of management
B)analyzing legal expense and reviewing invoices and statements from outside legal counsel
C)reviewing current and previous years' Canada Revenue Agency correspondence
D)obtaining a letter of representation from management that it is not aware of any undisclosed contingent liabilities

Question

Quizplus · Accepted Answer

Analyzing legal expenses and reviewing invoices and statements from outside legal counsel can provide clues about any pending or potential lawsuits that management may not be disclosing. This can be a useful way to uncover any undisclosed contingent liabilities. Option A may not be effective if management is intentionally neglecting to disclose the liability. Option C may not be relevant to discovering a contingent liability related to a lawsuit. Option D is not a reliable method since management may not disclose intentionally or may not be aware of the undisclosed contingent liability.

Which of the Following Procedures Might Be Useful in Discovering