Auditing - What are Attorney Letters

The video tutorial explains a required audit procedure involving the client, their attorney, and the auditor. The client must ask their attorney about litigations, claims, and assessments due to attorney-client privilege. The client sends a letter to the attorney, which includes potential litigation details, likelihood of outcomes, and estimated losses. The auditor is concerned with potential liabilities and disclosures in financial statements. The communication process ensures the auditor receives direct responses from the attorney, providing strong evidence.

What are the auditor's concerns regarding potential liabilities?

What might be included in the financial statements based on the likelihood and amount of potential loss?