[kleon52]

NINJA Question –

A lawyer’s response to an auditor’s inquiry concerning litigation, claims, and assessments may be limited to matters that are considered individually or collectively material to the client’s financial statements. Which parties should reach an understanding on the limits of materiality for this purpose?

Incorrect A.

The auditor and the client’s management

B.

The client’s audit committee and the lawyer

C.

The client’s management and the lawyer

D.

The lawyer and the auditor

Ninja says the correct answer is D

I know this is incorrect, even the reason for the right answer says its A

Legal counsel’s response may be limited to matters that are considered individually or collectively material to the financial statements, provided the entity and auditor have reached an understanding on the meaning and limits of materiality for purposes of this letter and management has communicated such understanding to the legal counsel.

“the entity and the auditor”

REG: 80
AUD: 82
BEC: 83
FAR: 83
Finished Feb 2015, 5-6months

Ninja MCQ for AUD, BEC, & FAR

[NeedToPassAudit]

kleon52

I also struggled to understand this question so I decided to look the answer up myself. Below you can see the excerpt from the AL regarding AU 337.12. I could not find the AU-C on this section so I am assuming that this was not one of the sections that was clarified.

Limitations on the Scope of a Lawyer’s Response

.12 A lawyer may appropriately limit his response to matters to which he

has given substantive attention in the form of legal consultation or representation.

Also, a lawyer's response may be limited to matters that are considered individually or collectively material to the financial statements, provided the lawyer and auditor have reached an understanding on the limits of materiality

for this purpose. Such limitations are not limitations on the scope of the

audit.

I hope this helps and good luck on your exam.

FAR 80
REG 88
BEC 86
AUD 98

Thank GOD!

[Author]

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