Page 116 - CA Inter Audit PARAM

CA Ravi Taori
(iii) A request that the entity’s external legal counsel confirm the reasonableness of management’s
assessments and provide the auditor with further information if the list is considered by the
entity’s external legal counsel to be incomplete or incorrect.

QNO Meeting with external legal counsel Old Course – (M22E)
501.11.50 Bhaskar CNO SA501.140 New Course – (M24R)
SPR Ltd has been into the media business since 1990. During the F.Y 2021-2022 many notices were
received by the company for hurting public sentiments and financial claims were filed against the
company. As an auditor of the company, you requested the management for arranging the meeting with
company's external legal counsel. Management is of the view that such meetings are necessary in some
certain circumstances only. Can you list down those certain circumstances?
Answer Circumstances when becoming necessary to meet with external legal counsel: In the given case of SPR Ltd.,
Auditor requested the management for meeting with SPR’s external legal counsel.

In certain circumstances, the auditor also may judge it necessary to meet with the entity’s external legal
counsel to discuss the likely outcome of the litigation or claims.
This may be the case, for example, where:

(i) The auditor determines that the matter is a significant risk.
(ii) The matter is complex.
(iii) There is disagreement between management and the entity’s external legal counsel.

Ordinarily, such meetings require management’s permission and are held with a representative of
management in attendance.

QNO-- Refuses to give permission to the auditor to communicate or meet with the New Course – (M24E)
external legal counsel
501.11.70
Bhaskar CNO – SA 501.140
CA Z, the auditor of MNO Ltd., during the course of audit, assesses a risk of material misstatements
regarding the litigations and claims involving the company. CA Z is not convinced with the management's
explanations regarding the status of the litigations or claims. It is considered unlikely that the entity's
external legal counsel will respond appropriately to a letter of general enquiry. The auditor sent a letter of
specific enquiry requesting the entity's external legal counsel to communicate directly with the auditor. List

out the inclusions in the letter of specific enquiry.

In certain circumstances the auditor may judge it necessary to meet with entity's external legal counsel to
discuss the likely outcome of the litigations or claims. What will be auditor's reporting responsibility if the
management refuses to give permission to the auditor to communicate or meet with the external legal
counsel?
Answer A letter of specific inquiry includes:

(i) A list of litigation and claims;

(ii) Where available, management’s assessment of the outcome of each of the identified litigation and
claims and its estimate of the financial implications, including costs involved; and

(iii) A request that the entity’s external legal counsel confirm the reasonableness of management’s
assessments and provide the auditor with further information if the list is considered by the
entity’s external legal counsel to be incomplete or incorrect.

In certain circumstances, the auditor also may judge it necessary to meet with the entity’s external legal
counsel to discuss the likely outcome of the litigation or claims. Further, if management refuses to give
the auditor permission to communicate or meet with the entity’s external legal counsel, or the entity’s
external legal counsel refuses to respond appropriately to the letter of inquiry, or is prohibited from
responding, and the auditor is unable to obtain sufficient appropriate evidence by performing alternate
audit procedures, the auditor shall modify the opinion in the auditor’s report in accordance with SA 705.

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