Question

What matters must an auditor request management to include in Management Representation letter under paragraphs 10 and 11 of ASA 580?

Answer 1

Paragraph 10 of SA 580 ( Written representations) - it talks about the information provided to auditor and the completeness of transactions in financial statements.

As per paragraph 10, the Auditor shall request management to provide a written representation that:

1. It has provided the auditor with all relevant information and access as agreed in the terms of the audit engagement, and

2. All transactions have been recorded and are reflected in the financial statements.

Paragraph 11 talkst about the Management's responsibilities in the Written Representations:

As per paragraph 11, The auditor shall request managrmman 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 where relevant their fair presentation, as agrred in terms of audit engagement.

Moreover, below point's should keep in mind.

1. Audit evidence obtained during the audit that mangement has fulfilled the responsibilities referred in paragraph 10 and 11 is not sufficient without confirmation from management that it believes that it has fulfilled those responsibilities. This is because the auditor is not able to judge solely on other audit evidence whether management has prepared and presented the financial statements and provided information to the auditor on the basis of the agreed acknowledgment and understanding of its responsibilities.

2. The auditor may also ask management to reconfirm its acknowledgement and understanding of those responsibilities in written representations. This is particularly appropriate when:

a) Those who signed the terms of the audit engagement on behalf of the entity no longer have the relevant responsibilities.

b) The terms of audit engagement were prepared in previous year.

c) There is any indication that management misunderstands those responsibilities

d) Changes in circumstances make it appropriate to do so.