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 lawyers undertake a reconsideration of matters of litigation, claims, and assessments with which they were consulted during the period under examination.
B)Request that client management send a letter of inquiry to those lawyers with whom management consulted concerning litigation, claims, and assessments.
C)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.
D)Request that client management engage outside attorneys to suggest wording for the text of a footnote explaining the nature and probable outcome of existing litigation, claims, and assessments.

Question

Quizplus · Accepted Answer

The auditor's primary means of initiating action to corroborate information concerning litigation, claims, and assessments is by requesting that client management send a letter of inquiry to those lawyers with whom management consulted concerning these matters. This approach allows the auditor to obtain direct confirmation from the lawyers and facilitates the auditor's assessment of the potential impact of the litigation, claims, and assessments on the financial statements. Option A is incorrect because the auditor should not delegate the responsibility for corroboration to client lawyers. Option C is incorrect because the auditor may request a legal opinion, but this is not the primary means of initiating action to corroborate information. Option D is incorrect because the auditor should not ask client management to engage outside attorneys to suggest wording for the text of a footnote as this impairs the auditor's independence.

Management Furnishes the Independent Auditor with Information Concerning Litigation, Claims