If a company or organization is at risk of losing or winning a material lawsuit, then stakeholders should know about it, and transparency is expected. Such outcomes can impact decisions made by readers of an audited financial statement.
For every audit, auditors perform required procedures to determine if existing legal contingencies are fairly presented and properly disclosed in an entity’s audited financial statement. As part of the process auditors and law firms complete a legal confirmation. The legal confirmation request is first prepared by the auditor and client, and then the law firm provides an audit response letter detailing the status of the client's legal matters directly to the accounting firm.
Technology ensures that audit confirmation process requirements are adhered to by both accounting and legal professionals. Two critical components of the process are validation and auditor control, and if ignored an opportunity for fraud exists.
See below to learn more about the legal confirmation process and an effective workflow aided by technology.
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