You are the manager in charge of the audit of Crighton-Ward, a public limited liability company which manufactures specialist cars and other motor vehicles for use in films. Audited turnover is £140m with profit before tax of £75m. All audit work up to, but not including, the obtaining of management representations has been completed. A review of the audit file has disclosed the following outstanding points:

Lion's Roar The company is facing a potential legal claim from the Lion's Roar company in respect of a defective vehicle that was supplied for one of their films. Lion's Roar maintains that the vehicle was not built strongly enough whilst the directors of Crighton-Ward argue that the specification was not sufficiently detailed. Dropping a vehicle 50 metres into a river and expecting it to continue to remain in working condition would be unusual, but this is what Lion's Roar expected. Solicitors are unable to determine liability at the present time. A claim for £4m being the cost of a replacement vehicle and lost production time, has been received by Crighton-Ward from Lion's Roar. The director's opinion is that the claim is not justified.
Depreciation:  Depreciation of specialist production equipment has been included in the financial statements at the amount of 10 per cent per annum based on reducing balance. The treatment is consistent with prior accounting periods (which received an unmodified auditor's report) and other companies in the same industry, and sales of old equipment show negligible profit or loss on sale. The audit senior, who is new to the audit, feels that depreciation is being undercharged in the financial statements.

Required:
For each of the above matters:
(a) Discuss whether or not a paragraph is required in the representation letter and
(b) If appropriate, draft the paragraph for inclusion in the representation letter.