Would the following statement extracted from entity’s legal counsel’s letter regarding litigation, claims, and assessments most likely would cause the auditor to request clarification?
“I believe that the plaintiff will have problems establishing any liability.”
yes -- The letter of inquiry requests, among other things, that legal counsel evaluate the likelihood of unfavorable outcomes of pending or threatened litigation, claims, and assessments. It also requests that legal counsel estimate, if possible, the amount or range of potential loss (AU-C 501). Thus, the auditor is concerned about the amount of the expected settlement as well as the likelihood of the outcome. However, the statement that the plaintiff will have problems establishing any liability is unclear. For example, a plaintiff may have problems yet still prevail