An auditor has received a solicitor's letter in which no significant disagreements with the client's assessments of contingent liabilities were noted.The resignation of the client's solicitor shortly after receipt of the letter should alert the auditor that:
A)undisclosed unasserted claims may have arisen.
B)the solicitor was unable to form a conclusion with respect to the significance of litigation, claims and assessments.
C)the auditor must begin a new examination of contingent liabilities.
D)an adverse opinion will be necessary.

Question

Quizplus · Accepted Answer

The resignation of the solicitor may indicate that undisclosed unasserted claims have arisen, which could impact the assessment of contingent liabilities. As a result, the auditor should investigate further to ensure that all potential liabilities are properly disclosed and accounted for in the financial statements. Option B is incorrect because the solicitor's letter implies that they were able to form a conclusion on the client's contingent liabilities. Option C is incorrect because there is no indication that a new examination is necessary at this point. Option D is incorrect because the auditor would not necessarily need to issue an adverse opinion based solely on the solicitor's resignation.

An Auditor Has Received a Solicitor's Letter in Which No