Management Furnishes the Independent Auditor with Information Concerning Litigation, Claims

question 49

Multiple Choice

Management furnishes the independent auditor with information concerning litigation, claims, and assessments. Which of the following is the auditor's primary means of initiating action to corroborate such information?

• A) Request that client lawyers undertake a reconsideration of matters of litigation, claims, and assessments with which they were consulted during the period under examination.
• B) Request that client management send a standard inquiry to the client's attorney letter to those lawyers with whom management consulted concerning litigation, claims, and assessments.
• C) Request that client lawyers provide a legal opinion concerning the policies and procedures adopted by management to identify, evaluate, and account for litigation, claims, and assessments.
• D) Request that client management engage outside attorneys to suggest wording for the text of a footnote explaining the nature and probable outcome of existing litigation, claims, and assessments.

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Definitions:

Oligopolistic Industries

Markets dominated by a small number of large firms, leading to a high level of market concentration.

Bidding Down

The process where the price of an item, service, or contract decreases due to competitive bidding, for example, in auctions or procurement processes.

Particular Product

A specific item or good that is produced and available for sale or distribution.

Monopolistically Competitive

A market structure where many firms sell products that are similar but not identical, allowing for some degree of market power.