Your Client Has Returned to You the Representation Letter That

question 17

Essay

Your client has returned to you the representation letter that they sent to their lawyer.The letter contains the following statement from the client's lawyer:
"the directors seem to underestimate the likelihood of losing the case, and the potential financial settlement amount.We believe that there is little chance of successfully defending the matter, and expect that there will be amounts payable in the vicinity of $3 million, not $1 million.We do however remind you that the matter is only in preliminary stages and could still go either way".
Has the auditor collected this evidence in the appropriate way? What should the auditor do in regards to the information provided by the lawyer?

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Definitions:

Short-Run Outcomes

Results or consequences occurring within a brief time period following specific events or decisions in economics or business.

Price Level

A measure of the average prices of goods and services in an economy, indicating the purchasing power of the currency and the inflation rate.

Unemployment

The situation where individuals who are capable of working and are seeking work are unable to find employment.

Classical Notion

An economic theory advocating for free markets, competition, and minimal government intervention in the economy.