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If the audit is meant to examine the value, for instance, of a business, the pendency or possibility of a law suit could be extremely important, since an award against the business could impact its bottom line. For example, a construction business has had an accident at one of its work sites in which a bystander was severely injured. If the bystander was successful at suing the company for damages, winning $100,000 in damages and the company only had $50,000 in liability insurance, the business would presumably be worth $50,000 less than if no possibility of a law suit existed.

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Q: When should a possible lawsuit be listed in an audit report?
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