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

Question

Quizplus · Accepted Answer

The resignation of the client's lawyer shortly after receipt of the attorney's letter may indicate that undisclosed unasserted claims have arisen. Therefore, the auditor should consider the possibility of a material loss contingency that has not been properly disclosed in the financial statements.

A CPA Has Received an Attorney's Letter in Which No