Litigation, Claims, « Assessments (continued)

Client sends letter to attorney requesting corroboration of information supplied by management

regarding I, c, & a
Included in letter
Identification of company & date of audit
List prepared by management describing & evaluating pending or threatened I, c, & a
List prepared by management describing & evaluating unasserted claims & assess-
ments management considers probable of assertion
Request that lawyer furnish information regarding pending or threatened I, c, & a
Request that lawyer comment on views differing from those of management related to I,
c, & a
·1 Statement that lawyer will advise & consult with client regarding disclosure of unasserted
possible claims or assessments
Request that lawyer identify nature of & reasons for limitations on response to inquiry
The lawyer will respond with
Description of pending I, c, & a including progress to date and intended actions
·2 Evaluation of probability of unfavorable outcome & estimate of range of loss

Focus on
138
Evidence - Module 3

Litigation, Claims, «Assessments (continued)

• Omissions, if any, of pending or threatened I, c, & a from list prepared by client
Lawyer's refusal to respond represents a scope limitation

Related Parties
Audit procedures should be performed to identify & evaluate the disclosure of related-party
transactions

In performing the audit, transactions may come to the auditor's attention indicating the existence
of related parties
Borrowing or lending at no interest or at rates significantly different from market rates
Sales of real estate at prices significantly different from appraised values
·3 Exchanges of similar property in nonmonetary transactions
·4 Loans with no scheduled terms
Procedures the auditor will apply include"
Examine minutes of board meetings

Focus on
Evidence - Module 3
139