Requirements and guidance for the auditor when dealing with pending litigation against the company on which he is reporting is given in ISA (UK) 501.
23.6.1 Audit procedures
The auditor should design and perform audit procedures to determine whether a risk of material misstatement may arise from any litigation or
claims involving the entity. These must include:
•enquiries of management and, where applicable, others within the entity;
•reviewing minutes of meetings with those charged with governance and correspondence between the entity and its legal advisers; and
•reviewing legal expense accounts.
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What are the procedures that the auditor should do in substantiate the claims and litigations of the client?
Audit Procedures
Get written assurances from management as to the completeness of the accounting for and disclosure of litigation, claims, and assessments in the financial statements. Examine invoices from lawyers and the legal expenses ledger account during and after the period being audited.
Which of the following procedures would an auditor most likely perform regarding litigation?
Which of the following procedures will an auditor most likely perform to obtain evidence about the occurrence of subsequent events? Inquiring of the entity's legal counsel concerning litigation, claims, and assessments arising after year end.
Which of the following is typically the auditors initial procedure performed to identify litigation claims and assessments?
Which of the following is typically the auditors' initial procedure performed to identify litigation, claims, and assessments? Inquire of the entity regarding the existence of litigation, claims, and assessments.
What is an auditor's primary method to corroborate information on litigation claims and assessments?
An attorney's letter is the primary method used to corroborate information on litigation, claims, and assessments.