Communications Between Auditors and Lawyers for the Identification and Evaluation of Litigation, Claims, and Assessments.

This article will describe the relevant accounting, auditing and legal pronouncements, suggest some pertinent auditing procedures, and analyze some problems that might result from communications between auditors and lawyers in corroborating evidence when identifying and evaluating litigation, claims and assessments against the client. Auditors who are identifying and evaluating litigation, claims, and assessments should familiarize themselves with two accounting pronouncements: Statement of Financial Accounting Standards No. 5: Accounting for Contingencies and FASB Interpretation No. 14: Reasonable Estimation of the Amount of a Loss. The main pronouncement guiding lawyers in the audit inquiry process is the American Bar Association's (ABA) Statement of Policy Regarding Lawyers' Responses to Auditors' Requests for Information.