Final answer:
The refusal of an entity's attorney to provide a legality representation on a particular act due to confidentiality is generally considered a scope limitation in the context of an audit, which may affect the auditor's ability to issue a clean opinion and, in extreme cases, may even lead to the auditor withdrawing from the engagement.
Step-by-step explanation:
The refusal of an entity's attorney to provide a representation on the legality of a particular act committed by the entity is generally considered to be a scope limitation. Scope limitations occur when an auditor is unable to obtain all the information necessary to form a complete and accurate opinion on an entity's financial statements. This can be due to a variety of reasons, such as restrictions imposed by the client, or, in this case, legal constraints that prevent an attorney from disclosing certain information due to client-attorney confidentiality.
It is essential to distinguish between different types of auditor's opinions. A 'subject to' qualified opinion is issued when the auditor concludes that the financial statements are presented fairly in all material respects, except for the effects of some matter. However, an attorney's refusal to provide certain information due to confidentiality may lead to a disclaimer of opinion or an adverse opinion, depending on the significance of the information withheld and its impact on the financial statements.
Moreover, in extreme situations where the scope limitation is so material and pervasive that the auditor cannot obtain sufficient appropriate audit evidence, it may be considered proper grounds to withdraw from the engagement. The decision to withdraw is complex and involves assessing the implications for the auditor, client, and the users of the financial statements.