As part of the ongoing audit of Winter Enterprises, the external auditor, Ghassan CPAS are reviewing the client's balance sheet. An audit manager has noticed a contingent liability on the balance sheet, with an associated note explaining the client believes they may be the subject of litigation in the near future. What would be the auditor's best course of action at this juncture? O Directly contact the client's legal counsel and attempt to obtain further details of the potential litigation. This should be done independently of the client and without the client's knowledge so management cannot alter any documentation or attempt to influence the external legal counsel. O Request written assurances from top management, indemnifying the external auditors from any lawsuits filed against the client. O Request permission from the client's management to contact the client's legal counsel and discuss the details of this potential litigation. O Immediately advise the client in writing of the auditor's intention to withdraw from the audit, citing the risk of litigation and the auditor's potential joint and several liability as the reason.

As part of the ongoing audit of Winter Enterprises, the external auditor, Ghassan CPAS are reviewing the client's balance sheet. An audit manager has noticed a contingent liability on the balance sheet, with an associated note explaining the client believes they may be the subject of litigation in the near future. What would be the auditor's best course of action at this juncture? O Directly contact the client's legal counsel and attempt to obtain further details of the potential litigation. This should be done independently of the client and without the client's knowledge so management cannot alter any documentation or attempt to influence the external legal counsel. O Request written assurances from top management, indemnifying the external auditors from any lawsuits filed against the client. O Request permission from the client's management to contact the client's legal counsel and discuss the details of this potential litigation. O Immediately advise the client in writing of the auditor's intention to withdraw from the audit, citing the risk of litigation and the auditor's potential joint and several liability as the reason.

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Question

As part of the ongoing audit of Winter Enterprises, the external auditor, Ghassan CPAS are reviewing the client's balance sheet. An
audit manager has noticed a contingent liability on the balance sheet, with an associated note explaining the client believes they may
be the subject of litigation in the near future. What would be the auditor's best course of action at this juncture?
O Directly contact the client's legal counsel and attempt to obtain further details of the potential litigation. This should be
done independently of the client and without the client's knowledge so management cannot alter any documentation or
attempt to influence the external legal counsel.
Request written assurances from top management, indemnifying the external auditors from any lawsuits filed against the
client.
Request permission from the client's management to contact the client's legal counsel and discuss the details of this
potential litigation.
Immediately advise the client in writing of the auditor's intention to withdraw from the audit, citing the risk of litigation and
the auditor's potential joint and several liability as the reason.

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