A client's lawyer is unable to form a conclusion about the likelihood of an unfavorable outcome of pending litigation because of inherent uncertainties. If the litigation's effect on the client's financial statements could be material but it is properly disclosed in the financial statements, the auditor most likely would:

Question

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Choice "D" is correct. A lawyer may be unable to respond concerning the likelihood of an unfavorable outcome of litigation, claims, and assessments or the amount or range of potential loss, because of inherent uncertainties. Even if the effect of the matter on the financial statements could be material, if it is properly disclosed (and supported by available evidence), the auditor will ordinarily issue an unqualified opinion without any modification. Choice "A" is incorrect. The inability to form an opinion on the amount or range of potential loss would generally not be classified as a scope limitation resulting in a qualification. Choice "B" is incorrect. The auditor should consider withdrawing from the engagement only if the lawyer withholds information per the client's request. Given the fact pattern, there is no need for the auditor to withdraw from the engagement. Choice "C" is incorrect. The inability to form an opinion on the amount or range of potential loss would generally not be classified as a scope limitation resulting in a disclaimer of opinion.

A Client's Lawyer Is Unable to Form a Conclusion About