ASA 508 - Enquiry Regarding Litigation and Claims - April 2006
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33 The auditor shall enquire of management about new legal matters referred to athe entity’s lawyers subsequent to the date of the request for a representation letter to the entity’s lawyers and prior to signing the auditor’s report.
34 Under paragraphs 13 and 33 of this Auditing Standard, when new legal matters have been referred to athe entity’s lawyers, subsequent to sending the representation letter to the entity’s lawyers and prior to signing the audit report, which may have a material effect on the financial report, the auditor needs to request management to prepare an additional representation letter to the lawyer regarding the new legal matters.
35 If audit procedures lead to the discovery of matters of a legal nature not previously identified by management, the auditor shall consider the impact of each of the matters on the financial report.
36 When legal matters are discovered, which were not previously identified by management, the auditor would ordinarily inform management and request they address further enquiries to, or arrange a meeting with, the entity’s lawyers or other relevant experts, at which the auditor would be present. In addition, under paragraph 5 of this Auditing Standard, the auditor needs to extend the auditor’s audit procedures to ensure that sufficient appropriate audit evidence on which to form an opinion has been obtained. If, however, having regard to all the circumstances, the auditor is unable to obtain satisfaction that all the information required for the purposes of the audit has been received, the audit opinion needs to be modified under ASA 701.
37 If information comes to the auditor’'s attention that may indicate the existence of material liabilities resulting from matters of a legal nature on which management has not sought advice, the auditor ordinarily discusses the matter with those charged with governance. Depending on the circumstances, refusal by management to seek advice may be considered to be a limitation in the scope of the auditor’s work.