How should the contingency be reported? Emily Gallagher is the independent auditor of Tate Manufacturing, a maker of handheld drills and other carpentry tools. Emily is evaluating current lawsuits for...

How should the contingency be reported?

Emily Gallagher is the independent auditor of Tate Manufacturing, a maker of handheld drills and other carpentry tools. Emily is evaluating current lawsuits for the company to determine whether any contingent liabilities should be disclosed. Tate Manufacturing is currently in litigation for a product liability case. The suit claims that a Tate handheld drill heated up quickly and caused a fire. Tate’s attorney has told Emily that it is likely that the manufacturer will lose the case, but he does not want to estimate the amount of damages. The attorney is concerned that estimating the amount of damages would establish a dollar amount for settlement and could place their case in jeopardy. What should Emily do?