Assignment task: The lawyer's letter is one of the most important audit confirmations. CAS 501 (6560) requires auditors to perform procedures identifying litigation and claims against the auditee, and, where there is a risk of material misstatement, auditors must communicate directly with the auditee's legal counsel. This is done by an enquiry letter from management to the lawyer, with the lawyer's response going directly from the lawyer to the auditor.
The objective is to provide audit evidence about any potentially material litigation or claims against the auditee and to determine if management's estimates of the possible costs of these are reasonable. Exhibit 15-3.1 is an example of an enquiry letter. The auditor asks management to send enquiry letters to all lawyers who performed work for the auditee during the period under audit. This request informs the lawyer that their client, the auditee, is waiving the privilege of communications between lawyer and client, and gives the lawyer permission to give information to the auditors.