Management Representation Letters

Question 1

T/F: Auditors should always document verbal conversations with management to corroborate verbal responses?

Answer 1

True, one of the auditors objectives is to obtain written representations from management that they believe they have fulfilled their responsibility for the preparation and fair presentation of the F/S.

Question 2

What if management is unwilling to sign the management representation letter?

Answer 2

Results in a disclaimer of opinion or withdrawal from the engagement

Question 3

Who should the management representation letter be addressed to?

Answer 3

The auditors

Question 4

What is the date of the management representation letter?

Answer 4

Same date as the audit report

Question 5

What are some major topics discussed in the management representation letter?

Answer 5

• Materiality
• Financial statement responsibilities (preparation, fair presentation, design/maintenance of IC, responsibility to detect fraud or error, accounting estimates are reasonable, related party transactions have been disclosed according to US GAAP, uncorrected misstatements are immaterial.

Information provided:

• Provided auditors access to all necessary information
• No knowledge of fraud
• No knowledge of allegations of fraud
• Disclosed to you all instances of noncompliance with laws and regulations
• Identified any related parties

Question 6

Who typically sign the management representation letter?

Answer 6

Both CEO and CFO

Question 7

Can the date of the management representation letter be signed or dated before the audit report?

Answer 7

NO!!

Question 8

What are the two broad categories of the representation letter?

Answer 8

1) Financial statements- responsibility

2) Information Provided to auditors