In response to your client's request for a legal representation letter the attorney has furnished the following opinion with respect to litigation brought against the client: It is our opinion, based on the limited facts of which we are presently apprised, that the plaintiff's claims are without substantial merit. This opinion is based solely on the complaint, preliminary discussions with management of and attorneys for the corporation and a review of limited documentary materials. The opinion expressed in this letter is subject to amendment or qualification based on additional facts which might be developed or on amended pleadings. The litigation involves a claim for damages that would be material with respect to your client's financial position if the plaintiff prevails.

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?