Written Representations. Hart, an assistant accountant with the firm of Better &
ID: 2465831 • Letter: W
Question
Written Representations.Hart, an assistant accountant with the firm of Better & Best, CPAs, is auditing the financial statements of Tech Consolidated Industries Inc. The firm's audit plan calls for the preparation of written representations.
Required:
a) In an audit of financial statements, in what circumstances are auditors required to obtain written representations?
b) What are the major categories of items covered by written representations?
c) To whom should the representations be addressed and as of what date should they be dated?
d) Who should sign the representations and what would be the effect of a refusal to sign them?
e) In what respects may auditors' other responsibilities be relieved by obtaining written representations?
Explanation / Answer
a)
The specific written representations obtained by the auditor will depend on the circumstances of the engagement and the nature and basis of presentation of the financial statements. The auditor should provide a copy of the representation letter to the audit committee if management has not already provided the representation letter to the audit committee.
b)
c)
The representation letter ordinarily should be tailored to include additional appropriate representations from management relating to matters specific to the entity's business or industry.
e)
An auditor is not relieved of any responsibility with the receipt of management's letter of representation. The letter of representation is a required procedure in gathering audit evidence.
c)
Occasionally, circumstances may prevent management from signing the representation letter and returning it to the auditor on the date of the auditor's report. In those circumstances, the auditor may accept management's oral confirmation, on or before the date of the auditor's report, that management has reviewed the final representation letter and will sign the representation letter without exception as of the date of the auditor's report thereby providing sufficient appropriate audit evidence for the auditor to date the report. However, possession of the signed management representation letter prior to releasing the auditor's report is necessary because paragraph .21 requires that the representations be in the form of a written letter from management. Furthermore, when there are delays in releasing the report, a fact may become known to the auditor that, had it been known to the auditor at the date of the auditor's report, might affect the auditor's report and result in the need for updated representations. Section 560 addresses the auditor's responsibilities in such circumstances
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