ExpertMedium1 markMultiple Choice
CPA · Question 55 · Area III: Performing Procedures
An auditor is preparing a letter of audit inquiry to the client's legal counsel. Which of the following is the primary objective of this letter?
An auditor is preparing a letter of audit inquiry to the client's legal counsel. Which of the following is the primary objective of this letter?
Answer options:
A.
To identify all lawsuits the client is involved in.
B.
To obtain a legal opinion on the fairness of the financial statements.
C.
To corroborate the information furnished by management concerning litigation, claims, and assessments.
D.
To confirm that the lawyer has not committed malpractice.
How to approach this question
Legal Letter = Corroboration. Management tells you what's happening; Lawyer confirms if Management is telling the truth about the odds of losing.
Full Answer
C.To corroborate the information furnished by management concerning litigation, claims, and assessments.✓ Correct
To corroborate the information furnished by management concerning litigation, claims, and assessments.
The letter of inquiry to legal counsel is a substantive procedure used to corroborate management's assertions regarding the existence, completeness, and valuation of litigation, claims, and assessments.
Common mistakes
Thinking the lawyer provides the initial list (Management does).
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