ACCA AAA · Chapter 19
Written representations
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Written representations: use and limits
Representations support they do not replace audit evidence
ISA 580
- Management confirms preparation responsibility
- All relevant information and access provided
- All transactions recorded and reflected in statements
Other ISAs may require
- Fraud and NOCLAR disclosed
- Litigation, estimates and related parties addressed
- Subsequent events and going concern plans addressed
Additional, tailored matters
- Side agreements, lender concessions or commitments
- State exactly what management must confirm
Representation letter
- From responsible, knowledgeable management
- Addressed to auditor and covers reported periods
- Dated near, but not after, auditor’s report date
Necessary evidence
- Auditor’s report cannot pre-date the representations
- Representations alone are never sufficient
Best use
- Confirm intentions, judgements or completeness
- Support evidence from other procedures
Compare with evidence
- Investigate inconsistency with correspondence or records
- Check signatories can reasonably know the matter
- Consider competence, integrity, values and diligence
Example
- Representation denies customer side agreements
- Sales correspondence shows post-year-end return right
- Reassess revenue and reliability of other representations
Key limit
- A letter does not cure contradictory evidence
Respond
- Discuss refusal with management
- Re-evaluate integrity and other audit evidence
- Determine implications for opinion
Mandatory ISA 580 representations
- Disclaimer if absent
- Also disclaimer if integrity doubts make them unreliable
Other requested representation
- Scope limitation: qualified if material
- Disclaimer if material and pervasive
Conclude
- Link the missing confirmation to evidence and possible effect
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