Question

what is the difference between a client letter of representation and a management letter? What is the primary purpose of each? What are some items that might be included in each letter?

Answer 1

Client representations are different from management representations. Auditor takes represntatrepre for the work which he cant perform audit procedures or where audit procedures gives contradictory information.

Management representations are given by management of the company from the internal sources of the organization

Whereas client representations are directly known to be as external confirmations which auditor will receive directly from client.

So representations from client are more reliable than management representations.

Management representations are not so reliable because the auditor is giving opinion on work of management and normally no one says negatives about themselves.

Primart purpose is to get information from such representations where audit procedures can't be performed or whrew audit procedures performed but where conclusions cant be reached because of contradictory information he has. It is primarily used as a supporting document for auditor to reach conclusions

It is well said that management representations are just supporting documents for the audit conclusions but not the sufficient and appropriate evidemceefor reaching conclusions

Items where confirmations taken includes

1. Bank balance confirmation

2. Inventory balance confirmation held by third parties

3. Information related to litigation and claims

4. Information concerning about subsequent events

5. Plans and strategies for maintaing books and fulfilling it's responsibility

6. Information's regrading internal financial controls

7. completeness and accuracy of minutes of meetings

8. Availability of all financial records and data

9. Compliance with regilatireg and ckmmuncommuni for non compliances with statutory authorities