Includes: Completeness of Litigation and Claims, Communication with the Entity’s Legal Counsel, Written Representations, Related Procedures

Completeness of Litigation and Claims


The auditor shall design and perform audit procedures in order to identify litigation and claims involving the entity which may give rise to a risk of material misstatement, including: (Ref: Para. A1‑Aus A4.1)

  1. Enquiry of management and, where applicable, others within the entity, including in‑house legal counsel;
  2. Reviewing minutes of meetings of those charged with governance and correspondence between the entity and its external legal counsel; and
  3. Reviewing legal expense accounts.  (Ref: Para. A4)

Communication with the Entity’s Legal Counsel

External Legal Counsel


If the auditor assesses a risk of material misstatement regarding litigation or claims that have been identified, or when audit procedures performed indicate that other material litigation or claims may exist, the auditor shall endeavour to, in addition to the procedures required by other Australian Auditing Standards, seek direct communication with the entity’s external legal counsel.  The auditor shall do so through a letter of enquiry, prepared by management and sent by the auditor, requesting the entity’s external legal counsel to communicate directly with the auditor.  If law, regulation or the respective legal professional body prohibits the entity’s external legal counsel from communicating directly with the auditor, the auditor shall perform alternative audit procedures.  (Ref: Para. A5‑A8)

In‑house and/or External Legal Counsel


Where in‑house legal counsel has the primary responsibility for litigation and claims and is in the best position to corroborate management’s representations, the auditor shall endeavour to obtain a representation letter from the in‑house legal counsel, seeking information similar to that sought from the entity’s external legal counsel.  (Ref: Para. Aus A8.1‑Aus A8.2)

Legal Counsel’s Response


If a response from the entity’s external or internal legal counsel contains a material disagreement with management’s original evaluation of a particular matter, the auditor shall seek discussions with management and the entity’s legal counsel, unless management subsequently agrees with the legal counsel’s evaluation. (Ref. Para. Aus A8.3-Aus A8.6)



  1. 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 enquiry, or is prohibited from responding; and (Ref: Para. Aus A8.7‑Aus A8.8)
  2. the auditor is unable to obtain sufficient appropriate audit evidence by performing alternative audit procedures, (Ref: Para. Aus A8.9‑Aus A8.10)

the auditor shall modify the opinion in the auditor’s report in accordance with ASA 705 Modifications to the Opinion in the Independent Auditor’s Report (Ref: Para. Aus A8.11)

Written Representations


The auditor shall request management and, where appropriate, those charged with governance, to provide written representations that all known actual or possible litigation and claims whose effects should be considered when preparing the financial report have been disclosed to the auditor and accounted for and disclosed in accordance with the applicable financial reporting framework.  (Ref: Para. Aus A8.12‑Aus A8.13)

Related Procedures


The auditor shall enquire of management about new litigation and claims referred to the entity’s legal counsel subsequent to the date of the request for a letter of enquiry to the entity’s legal counsel and prior to signing the auditor’s report. (Ref. Para A9-Aus A9.1)


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.  (Ref: Para. Aus A9.2‑Aus A9.3)