Your client is involved in litigation involving a claim for damages that would be material with respect to its financial position if the plaintiff prevails. In response to your client's request for a legal representation letter the attorney has furnished. the following opinion: "Based on the facts known to us, after a full investigation, it is our opinion that no liability will be established against the company in these suits."

1. Evaluate the adequacy of the attorney's response as a matter of audit evidence on the litigation.

2. What impact will the existence of the litigation have on your audit report?

3. Should you refer to the attorney's opinion in your audit report?