What are the objectives of the auditor in requesting written representations?

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Project Status

Project completed.

The objective of this project was to revise ISA 580, Management Representations. The IAASB approved ISA 580 (Revised and Redrafted), Written Representations in December 2007. The ISA was published in April 2008 after the Public Interest Oversight Board has confirmed that due process was followed in its development. The ISA is effective for audits of financial statements for periods beginning on or after December 15, 2009. A Basis for Conclusions provides background to the project, main comments received on the exposure draft, and the IAASB's conclusions regarding these comments in developing the final standard.

Reasons for revising ISA 580 included the following:

• The need to limit possible overreliance on representations by auditors;
• The need to establish why auditors require representations;
• The need to establish what evidence representations provide; and
• The need to determine who should provide representations.

• The fundamental premise, relating to management' responsibilities, on which an audit is conducted;
• Written representations about the premise and other written representations;
• Written representations as audit evidence;
• Unreliable written representations / refusal to provide written representations;
• Who should provide written representations;
• Date of the written representations; and
• A threshold amount for written representations.

SAS No. 66 Written Representations

Status

Issued by Auditing Standards Committee in Taiwan on 14 November, 2017

Summary

This Statement deals with deals with the auditor’s responsibility to obtain written representations from management[1] in an audit of financial statements.(1) Written representation is a written statement by management provided to the auditor to confirm certain matters or to support other audit evidence.

The objectives of the auditor are:

(a) To obtain written representations from management that they believe that they have fulfilled their responsibility for the preparation of the financial statements and for the completeness of the information provided to the auditor;

(b) To support other audit evidence relevant to the financial statements or specific assertions in the financial statements by means of written representations if determined necessary by the auditor or required by other SASs; and

(c) To respond appropriately to written representations provided by management, or if management do not provide the written representations requested by the auditor.

The auditor shall request written representations from management with appropriate responsibilities for the financial statements and knowledge of the matters concerned:

(a) For the preparation of the financial statements: The auditor shall request management to provide a written representation that it has fulfilled its responsibility for the preparation of the financial statements in accordance with the applicable financial reporting framework, including their fair presentation, and for internal control that is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error, as set out in the terms of the audit engagement; and

(b) For information provided and completeness of transactions: The auditor shall request management to provide a written representation that, as agreed in the terms of the audit engagement, the management has provided the auditor with access to all information of which management is aware that is relevant to the preparation of the financial statements, additional information that the auditor may request from management for the purpose of the audit, and unrestricted access to persons within the entity from whom the auditor determines it necessary to obtain audit evidence. The auditor shall also request management to provide a written representation that all transactions have been recorded and are reflected in the financial statements.

If the auditor has concerns about the competence, integrity, ethical values or diligence of management, or about its commitment to or enforcement of these, the auditor shall determine the effect that such concerns may have on the reliability of representations (oral or written) and audit evidence in general. If written representations are inconsistent with other audit evidence, the auditor shall perform audit procedures to attempt to resolve the matter. If the matter remains unresolved, the auditor shall reconsider the assessment of the competence, integrity, ethical values or diligence of management, or of its commitment to or enforcement of these, and shall determine the effect that this may have on the reliability of representations (oral or written) and audit evidence in general.

If the auditor concludes that the written representations are not reliable, the auditor shall take appropriate actions, including determining the possible effect on the opinion in the auditor’s report.

If management does not provide one or more of the requested written representations, the auditor shall discuss the matter with management, reevaluate the integrity of management and evaluate the effect that this may have on the reliability of representations (oral or written) and audit evidence in general, and take appropriate actions, including determining the possible effect on the opinion in the auditor’s report.

The auditor shall disclaim an opinion on the financial statements if:

(a) The auditor concludes that there is sufficient doubt about the integrity of management such that the written representations required by paragraphs 7 and 8 are not reliable; or

(b) Management does not provide the written representations required by paragraphs 7 and 8.

Effective date

This Statement is effective from 1 July, 2018.

[1] In this SAS, references to “management” should be read as “management and, where appropriate, those charged with governance.

Why do auditors seek written representation?

Which of the following is an objective of the auditor in obtaining written representations from management?

What is the main purpose of a written representation letter?

Why is it important for an auditor to request a management representation letter?