The auditor should carry out procedures to become aware of any material litigation or claims
involving the entity. Such procedures would include:
•• Review of the client system for recording claims and disputes and the procedures for
bringing this to the attention of the board.
•• Examination of the minutes of the board for reference to and indications of possible
claims.
•• Making appropriate enquires from management including obtaining representations
about the existence and nature of litigation against the company. Inspection of bills
rendered by the solicitors.
•• Reviewing correspondence with solicitors with an estimate of the possible ultimate
liability.
•• Written assurance in the form of a representation letter from an appropriate director that
he is not aware of any other matters referred to the lawyers other than those disclosed.
If the auditor is in doubt, he should obtain a direct confirmation from the company’s
lawyers. The request must be sent by the client not the auditor.
Wilfykil answered the question on April 12, 2019 at 06:48
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