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Third party audit evidence is valuable in general because it is from another party that has no vested interest in the client, so it can therefore be relied upon. For what reason is a written representation good audit evidence?
Thank you.Written representations are only ‘good’ if they are necessary. If there are other ‘better’ sources of evidence, written representations are not ‘good’ because they’re not required.
Written representations may be necessary:
1. Because ISA 580 says you should have it (e.g. management’s acknowledgement of responsibility for the preparation of financial statements)
2. Because another ISA says you should have it (e.g. ISA 550 that all known related parties/RPTs have been disclosed to the auditor/disclosed in accordance with IFRS).Most of the examples in 2 (IAS 240, ISA 250, ISA 501, ISA 560) are relevant to the COMPLETENESS assertion. Another example is to obtain documented represented (signed by the board) of management’s intentions/plans that may be relevant to going concern (ISA 570).
So it’s basically for areas where there is not a lot of other evidence, so the best you can do is get management to make a written statement (put in in writing) in relation to the matter, and then if things turn out differently in future, as auditor you have that written statement as legal evidence. So management would not want to say something that’s untrue because it might have legal implications for them later. Yes?
Thank you.
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