What is an Attorney's Letter
An attorney's letter is a formal business letter sent by a CPA to a client's attorney. The attorney's letter serves as verification for information pertaining to litigation related to management. This letter apprises the auditor of any pending legislation against the client that could result in financial loss and impact the company's balance sheet and cash flow.
BREAKING DOWN Attorney's Letter
The attorney's letter constitutes a major procedure in the audit process. Auditors will request this letter if they have any doubt that the management of the company they are auditing has litigation pending against it that they have not disclosed to the auditor. This letter will then provide them with the information that they need.
Essentially, the letter seeks to confirm that the information provided by a client is accurate and complete. Upon receipt of a response from an attorney, a CPA can better determine whether a client’s legal situation has a material impact on the information reported in its financial statements. This is of special care when possible losses from damages awarded as the result of a lost lawsuit are a possibility.