Inquiry of Client's Attorney. Morgan LeFay, AS, of Horsens, Denmark, auditor Jan Ogier, Statsautoriseret Revisor, determines that LeFay has paid legal fees to four different law firms during the year under audit. Ogier requests standard attorney letters as of the balance sheet date from each of the four law firms. Jan Ogier receives the following responses:
1 One attorney furnished the following opinion: "It is our opinion that, based on a complete investigation of the facts known to us, no liability will be established against LeFay in the suits referred to in your letter of inquiry."
2 Attorney number two states that there may be a potentially material lawsuit against the client but refuses to comment further to protect the legal rights of the client.
3 By the last day of field work, Ogier has not received any letter from the third attorney.
4 The letter from the fourth attorney writes that their firm deals exclusively in registering song copyrights and cannot comment on LeFay lawsuits or any other legal affairs.
Required:
A. Discuss the adequacy of the attorney's response in each of the four cases What procedures should Ogier take in response to each letter?
B. What impact will each of these letters have on Ogier's audit report? Explain.
C. Should you refer to the attorney's opinion in your audit report or disclosures?