What is an Attorney’s Letter?

An attorney’s letter is issued by a CPA to the attorney of a client, requesting verification of pending litigation information provided by the client to the CPA. In essence, the letter seeks to confirm that the information provided by the client is accurate and complete. This is a key audit step, since the auditor needs to know if there is any pending litigation that may have an adverse impact on the client’s financial statements.

Upon receipt of a response from the attorney, the CPA determines whether the client’s legal situation has a material impact on the information reported in its financial statements, especially in regard to any possible losses from damages awarded as the result of a lost lawsuit.

When the information provided by an attorney differs from what a CPA has been told by client management, this is an indicator that either management is hiding information, or that the client has poor procedures in place for tracking and accounting for litigation issues.