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As mentioned, auditors send confirmation letters to third-parties. This could be a bank, lawyer or supplier. For example, a letter may be sent to a company's lawyers to determine whether there's any pending litigation that needs to be reported or disclosed in the company's audited financial statements.
31. When the auditor has not received replies to positive confirmation requests, he or she should apply alternative procedures to the nonresponses to obtain the evidence necessary to reduce audit risk to an acceptably low level.
In addition, auditors should obtain written representations for any other matters they believe necessary. Auditors are required to inform those charged with governance that they have requested written representations from management.
Thus all CPAs should be requiring this letter for all audit engagements. From a practical standpoint, this letter assures the CPA that management has given the accountant all pertinent information.
Ing to ASC 450, the lawyer should provide the following information to the auditor in the audit letter: (1) a description of the nature of each matter, (2) the progress of each matter to date, (3) how the city has responded or intends to respond (for example, to contest the case vigorously or to seek an out-of- ...