In planning an audit, an auditor established materiality at $40,000. The auditor received an attorney's letter indicating that it was probable that each of three lawsuits would be settled for $30,000. Which of the following actions should the auditor take?

A. Add a separate paragraph to the audit report disclosing the contingencies and their amounts.

B. Ask the client to disclose the contingencies in the notes to the financial statements.

C. Ask the client to record the liability for the three contingencies.

D. Add a paragraph to the auditor's opinion disclosing a scope limitation.