6. specifically for “asserted claims,” what information does the auditor request from the lawyer

by Dr. Marshall Champlin 10 min read

What information does the Auditor request from the lawyer?

In the typical request letter, the auditor (through the client) requests information from the lawyer about two general classifications of loss contingencies: 1) pending or threatened litigation or other proceedings, and 2) unasserted claims and assessments.

Are there any claims or assessments that are probable of assertion?

However, in some cases, clients have stated that there are no such claims or assessments (to be specified to the lawyer for comment) that are probable of assertion and that, if asserted, would have a reasonable possibility of an unfavorable outcome. What appropriate revision to the wording of the letter can be used in such situations?

Which appendix provides an illustrative audit inquiry letter to legal counsel?

.10 Question —The Appendix [AS 2505A] of AS 2505 provides an illustrative audit inquiry letter to legal counsel.

How will the assets of a claimant be dealt with?

The assets which appear in each Claimant’s Client Assets Claim Statement and/or each Claimant’s Asserted Claim Statement (as applicable) will be dealt with as set out at Clauses 5 to 12 below.

What kind of information can be used as audit evidence?

Examples of auditing evidence include bank accounts, management accounts, payrolls, bank statements, invoices, and receipts. Good auditing evidence should be sufficient, reliable, provided from an appropriate source, and relevant to the audit at hand.

What information is typically requested in a legal letter to an entity's attorney?

What information is typically requested in a legal letter to an entity's attorney? A list and evaluation of any pending or threatened litigation to which the attorney has devoted substantial attention.

What are the requirements for audit evidence obtained?

Audit procedures to obtain audit evidence can include inspection, observation, confirmation, recalculation, reperformance, and analytical procedures, often in some combination, in addition to inquiry.

Which of the following is correct regarding including client data in audit documentation for an issuer?

Which of the following is correct regarding including client data in audit documentation for an issuer? There is no specific requirement to include client data in auditing documentation.

What are four pieces of information should you request in an attorney letter concerning pending or threatened litigation?

[Ordinarily the information would include the following: (1) the nature of the litigation, (2) the progress of the case to date, (3) how management is responding or intends to respond to the litigation (for example, to contest the case vigorously or to seek an out-of-court settlement), and (4) an evaluation of the ...

Why do auditors request a legal letter?

Auditors will request this letter for any audit and particularly if they have a doubt that the management of the company they are auditing has litigation pending against it that they have not disclosed. This letter will then provide them with the information that they need.

Why do auditors inspect records and documents?

Inspection of records and documents provides audit evidence of varying degrees of reliability, depending on their nature and source and, in the case of internal records and documents, on the effectiveness of the controls over their production.

What are the audit procedures to be performed by auditor to obtain audit evidence to draw reasonable conclusions on which he can base the audit opinion?

Audit procedures that are used to obtain audit evidence are various and are often applied in combination. They can include inspection, observation, confirmation, recalculation, reperformance and analytical procedures, in addition to inquiry, as the latter does not normally provide sufficient audit evidence on its own.

What type of evidence is obtained when the auditor calculates information for the audit from other data?

When an auditor calculates information for an audit from other data. The type of evidence collected by an auditor counting inventory. Features of audit evidence. Differentiating between observation and reperformance.

Which of the following is a documentation requirement that an auditor should follow when auditing in accordance with Government Auditing Standards?

Which of the following is a documentation requirement that an auditor should follow in a financial audit in accordance with Government Auditing Standards? The auditor should document the supervisory review of the evidence that supports the findings, conclusions, and recommendations contained in the auditors' report.

What should be included in audit documentation?

Objectives of Audit Documentation Among other things, audit documentation includes records of the planning and performance of the work, the procedures performed, evidence obtained, and conclusions reached by the auditor. Audit documentation also may be referred to as work papers or working papers .

Which of the following documentation is required for an audit in accordance with generally accepted auditing standards?

The correct answer is b) A client engagement letter that summarizes the timing and details of the auditor's planned fieldwork.

What happens if an attorney refuses to provide the auditor with information about material existing lawsuits or unasserted

If an attorney refuses to provide the auditor with information about material existing lawsuits or unasserted claims, current professional standards require that the auditor consider the refusal as a scope limitation.

Why do auditors request an inquiry letter?

Auditors, as part of completing the audit, will request the client to send a standard inquiry to the client's attorney letter to those attorneys the company has been consulting with during the year under audit regarding legal matters of concern to the company. The primary reason the auditor requests this information is to

What is an auditor reconciling?

An auditor is reconciling the amounts included in the long-term debt footnotes to the information examined and supported in the audit files for long-term debt. Which audit objective is being satisfied?

What are the audit procedures for the subsequent events review?

The audit procedures for the subsequent events review can be divided into two categories: (1) procedures integrated as a part of the verification of year-end account balances, and (2) those performed specifically for the purpose of discovering subsequent events. Which of the following procedures is in the first category?

What is the purpose of auditing standards?

Auditing standards require auditors to evaluate whether there is substantial doubt about a client's ability to continue as a going concern. One of the most important audit procedures to perform to assess the going concern question is

What is the role of an auditor in a balance sheet audit?

The auditor has a responsibility to review transactions and activities occurring after the balance sheet date to determine whether anything occurred that might affect the statements being audited. The procedures required to verify these transactions are commonly referred to as the review for

What happens when an auditor concludes there are contingent liabilities?

If the auditor concludes that there are contingent liabilities, he or she must evaluate the significance of the potential liability and the nature of the disclosure needed in the financial statements. Which of the following statements is nottrue?

What should an auditor be aware of?

If the auditor does not apply the auditing guidance included in an applicable auditing interpretation, the auditor should be prepared to explain how he or she complied with the provisions of the auditing standard addressed by such auditing guidance.

What is the purpose of a.31 question?

.31 Question —In order to emphasize the preservation of the attorney-client privilege with respect to unasserted possible claims or assessments , some lawyers include the following or substantially similar language in their responses to audit inquiry letters:

Is there merit to litigation?

The company believes there is absolutely no merit to the litigation.". (If client's counsel, with the benefit of all relevant information, is unable to conclude that the likelihood of an unfavorable outcome is "remote," it is unlikely that management would be able to form a judgment to that effect.)

What is an asserted claim?

1. Asserted Claim means any allegation, claim or complaint that is the result of, or in connection with, your exercise of your rights and/or carrying out of your obligations under this Agreement (including any claim associated with your operation of the Franchised Business or otherwise), or any default by you under this Agreement, ...

Who may assume and control the defense of an asserted claim?

The Sellers' Representative may assume and control the defense of such Asserted Claim (with counsel reasonably acceptable to the Indemnified Person) if it affirms the obligation of the Sellers to indemnify the Indemnified Person with respect to such Asserted Claim.

Can a seller's representative enter into a settlement with the indemnified person?

Neither the Indemnified Person nor the Sellers' Representative may consent to the rendering of a judgment with respect to the Asserted Claim or enter into a settlement with respect to the Asser ted Claim if such judgment or settlement does not unconditionally release the Sellers or the Indemnified Person , as the case may be, from all liability with respect thereto without the consent of such Party.

What does a client write to its auditor?

Your client writes a letter, asking you to send to its auditor information about certain types of loss contingencies, such as litigation and unasserted claims. As you draft a response, you are entering a minefield, thick with issues relating to waiver of privilege, terms of art such as “probable” and “remote,” risk of disclosure to litigation opponents, and the only “treaty” affecting most domestic U.S. lawyers. Missteps bring severe consequences.

What is appropriate language in the lawyer's response to the auditor?

Appropriate language in the lawyer’s response to the auditor reduces the risk of disclosure. Compliance with the treaty requires careful adherence to a multistep process. Although not mandatory, a written policy is recommended.

What is the auditor's duty?

The auditor’s duty is to the reader of the client’s financial reports and is public in nature, for the purpose of stating an opinion on whether they present fairly the financial position and results of operations of the client. Pursuant to FAS No. 5, the auditor must account for (possibly accrue or disclose) loss contingencies (litigation, and unasserted claims and assessments) which are within the lawyer’s special knowledge because of legal services rendered to the mutual client. The auditor requests the client to ask the lawyer for information intended to assist the auditor in properly accounting for those loss contingencies.

What is the duty of a lawyer?

The lawyer’s duty is to the client and is private in nature. The lawyer represents or advises the client in some defined capacity—for example, general counsel, litigation only, specific litigation only, or specific nonlitigation matters only.

What is the nature of a lawsuit?

1) The nature of the litigation, claim, or assessment; 2) The history of the matter or progress of the litigation; 3) The lawyer’s opinion about the likelihood of an unfavorable outcome ; 4) The company’s experience with previous similar contingencies; and. 5) How the company’s management intends to respond to the matter.

Should a lawyer respond to a material loss contingency?

Third, the lawyer should respond only with respect to material loss contingencies. The auditor should state an objective standard of materiality, such as a dollar amount, in the request to the lawyer; if there is none, the lawyer may wish to consult with the auditor about the standard. Evaluation Limitations.