You are the revlew partner for the audit of BMP Research, a maker of internet routers. The engagement partner has recommended a cean audit report for the year ending December 31. It is February 2 of the

following year and you have noted the following Items for discussion with the audit manager before you authorize the issuance of the audit report.

. The legal letter was received from the BMP's lawyer on January 13. In It reference was made to a lawsuit against BMDP for patent intringement. The lawsuit calmed the last two year's profits, which would

be a super material amount. The lawyer has indicated that while the Ilkellhood of success could not be determined at the time, the cost of defending the lawsuit would be around $500,000, and amount just

over materiality. BMDP disclosed the lawsuit in its notes to the financial statements but made no adjustment to the financial statements.

il. No bank confirmation was in the file. There was a note stating that the bank did not recelve the request for a confirmation. Due to the tight deadline on the audit, the manager pholocopied the final bank

statement and then had the client log in and print a copy of the online bank statement for the period January 1 to January 15. The opening balance of the online statement agreed to the dosing balance of

the one received from the bank and the audit manager concluded that this was satisfactory evidence.

There were no other items of note in the file.

Required

a. (8 marks) Prepare your notes for discussion with the audit manager.

b. (4 marks) At this point do you believe a clean opinion is appropriate? Why or why not?