Page 354 - Auditing Standards

As of December 15, 2017
regarding the probability of assertion of any possible claim inherent in any of the matters so considered.

6 The American Bar Association has approved a "Statement of Policy Regarding Lawyers' Responses to

Auditors' Requests for Information," which explains the concerns of lawyers and the nature of the limitations an
auditor is likely to encounter. That Statement of Policy is reprinted as Exhibit II (AS 2505C) for the convenience
of readers, but is not an integral part of this Statement.

7 A refusal to respond should be distinguished from an inability to form a conclusion with respect to certain
matters of judgment (see paragraph .14). Also, lawyers outside the United States sometimes follow practices at

variance with those contemplated by this section to the extent that different procedures from those outlined
herein may be necessary. In such circumstances, the auditor should exercise judgment in determining whether
alternative procedures are adequate to comply with the requirements of this section.

Footnotes (AS 2505C: Exhibit II - American Bar Association Statement of Policy Regarding Lawyers'
Responses to Auditors' Requests for Information):

* As contemplated by Paragraph 8 of this Statement of Policy, this sentence is intended to be the subject of

incorporation by reference as therein provided.

† Under FAS 5, when there has been no manifestation by a potential claimant of an awareness of a possible
claim or assessment, disclosure of an unasserted possible claim is required only if the enterprise concludes that
(i) it is probable that a claim will be asserted, (ii) there is a reasonable possibility, if the claim is in fact asserted,
that the outcome will be unfavorable, and (iii) the liability resulting from such unfavorable outcome would be

material to its financial condition.

‡ As contemplated by Paragraph 8 of this Statement of Policy, this sentence is intended to be the subject of
incorporation by reference as therein provided.

‡ As contemplated by Paragraph 8 of this Statement of Policy, this sentence is intended to be the subject of
incorporation by reference as therein provided.

|| Citations are to paragraph numbers of FAS 5.

† Note: See Paragraph 3 of the Statement of Policy and the accompanying Commentary for guidance

where the response is limited to material items.

** It may be appropriate in some cases for the response to be given by inside counsel other than inside
general counsel in which event this letter should be appropriately modified.

** It may be appropriate in some cases for the response to be given by inside counsel other than inside
general counsel in which event this letter should be appropriately modified.

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