Name:| | | |
Course:| | Term:| |
Assignment:| | Date:| |
Inquiry of a Client’s Lawyer Concerning Litigations, Claims and Assessments AU Section 337, sec 337A, sec337B, sec 337C, sec 9337
AU Section 337 and its supplements were developed in 1976 from SAS no.12. These papers advise auditors on the methodologies used and standards to be met when assuring that the accounting for losses based on contingencies rising from pending litigation are fairly represented on the financial statements. Section 337 accomplishes this by using a number of practices to guide the auditor. A detail of the accounting standards and explanations of the techniques in field work are the basis. These are supported by examples of letters & correspondences that an auditor can use, key interpretations of difficult passages, and corresponding passages from other professional associations that the auditor will encounter when trying to assure such contingencies. The document makes a key point to auditors in that they must remember that the client’s management is responsible for assessing the value of the contingent litigation. This is to be enforced with the practice and knowledge that we as auditors are responsible for assuring that it is valued fairly and that it follows FASB ASC 450. To help organize and apply this practice, a supplement to the section is 337-B. This document is an excerpt from FASB ASC 450. Auditors can use this as the standard to be met in regards to the accounting for loss and gain contingencies and the proper way to disclosure the contingency. ASC 450 also directs auditors on how management should assess the probability of a contingency. Lastly, the excerpt explains the determination of which financial period the loss or gain should be reported in.
The planning stage of the audit should identify elements and techniques that help auditors recognize the potential for losses arising from legal contingencies. These losses are not...