Which of the following procedures should an auditor perform concerning litigatio
ID: 2580786 • Letter: W
Question
Which of the following procedures should an auditor perform concerning litigation, claims, and assessments?
A.
Inspect legal documents in the possession of the client’s legal counsel that are relevant to pending litigation and unasserted claims and assessments.
B.
Confirm directly with the client’s legal counsel that all litigation, claims, and assessments have been properly recorded in the financial statements.
C.
Discuss with the client’s legal counsel its philosophy of defending litigation, claims, and assessments that have a high probability of being resolved unfavorably.
D.
Obtain a list from management that discloses all unasserted claims that it considers to be probable of assertion.
Which of the following procedures should an auditor perform concerning litigation, claims, and assessments?
A.
Inspect legal documents in the possession of the client’s legal counsel that are relevant to pending litigation and unasserted claims and assessments.
B.
Confirm directly with the client’s legal counsel that all litigation, claims, and assessments have been properly recorded in the financial statements.
C.
Discuss with the client’s legal counsel its philosophy of defending litigation, claims, and assessments that have a high probability of being resolved unfavorably.
D.
Obtain a list from management that discloses all unasserted claims that it considers to be probable of assertion.
Explanation / Answer
Answer: As per AU section 337 an independent auditor for concerning litigation, claims and assessment obtain assurance from management, ordinarily in writing, that it has disclosed all unasserted claims that the lawyer has advised them are probable of assertion and must be disclosed in accordance with Statement of Financial Accounting Standards No. 5 [AC section C59]. Also the auditor, with the client's permission, should inform the lawyer that the client has given the auditor this assurance.
Thus, answe is Option D.
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