ACCA Applied Skills · Audit and Assurance

Written representations: formula sheet

Full chapter guide

Key formulas

Definition (ISA 580): Written representation = written statement by management to the auditor confirming matters or supporting other audit evidence; Usually a letter of representation. It does not include the financial statements, assertions in them, or supporting books and records.
Required representations on responsibilities: Management confirms: (1) responsibility for preparing the financial statements, and (2) responsibility for providing information and access, and for recording all transactions; The auditor must request these. The audit cannot properly proceed on the basis intended without them.
Role as evidence: Written representations ≠ sufficient appropriate audit evidence on their own; They corroborate other evidence. They do not replace it.
Timing: Date of representations ≤ date of auditor's report, and as near to it as practicable; They cover all periods referred to in the auditor's report. Do not date them after the report.
Mandatory representation 1: Management confirms it has fulfilled its responsibility for preparing the financial statements, as in the engagement terms; Required by ISA 580 on every audit. It includes fair presentation where the framework requires it.
Mandatory representation 2: Management confirms it has provided all relevant information and access, and that all transactions are recorded; Covers completeness of information and of transactions. Required on every audit.
Role of representations: Written representations ≠ sufficient appropriate audit evidence on their own; They corroborate other evidence. They never replace procedures.
Date and form: Letter dated as near as practicable to, but not after, the date of the auditor's report; It covers all financial statements and periods referred to in the report.
Who signs: Those with appropriate responsibility and knowledge, usually management and, where appropriate, those charged with governance; Typically the chief executive and the finance director.
Addressee: Letter of representation: from management → to the auditor; It is on client letterhead. It is not a letter from the auditor to the client.
Date rule: Date of letter ≤ date of auditor's report (as near as practicable); Never after the report date. It should not be dated much earlier either, so that it covers events up to the report.
Signatories: Signed by those with overall responsibility and knowledge of the matters; Usually directors, such as the chief executive and finance director.
Evidence status: Written representation ≠ sufficient appropriate audit evidence on its own; It corroborates other evidence. It cannot replace procedures.
Required content: Responsibility for financial statements + provision of all information + complete recording of transactions; These are the core representations in ISA 580.

Quick revision

A written representation is a written statement by management provided to the auditor to confirm certain matters or support other audit evidence.
Representations are not sufficient appropriate evidence on their own about any matter other than management's responsibilities.
Auditors request representations that management has fulfilled its responsibility for preparing the financial statements.
Auditors request confirmation that management has provided all relevant information and access, and that all transactions are recorded.
The letter is addressed to the auditor.
It is dated as near as practicable to, but not after, the date of the auditor's report.
It is signed by those with appropriate responsibility, often the directors or senior management.
Additional representations may cover matters such as related parties, subsequent events, litigation and going concern.
If representations conflict with other evidence, investigate and reconsider the reliability of management and of other representations.
If management refuses to provide the required representations, discuss with them, reassess their integrity, and consider the effect on the opinion.
If management's responsibility representations are not provided, the auditor disclaims an opinion where appropriate.

Common mistakes

Saying a representation letter can replace other audit procedures. Fix: State that it is only supporting evidence. If other evidence should exist, the auditor must obtain it.
Describing it as independent external evidence. Fix: Say it comes from management, who are responsible for the financial statements, so it is internal and less reliable.
Treating a representation as enough evidence for a material item. Fix: State that it only corroborates other evidence and name the procedures still required.
Leaving out one of the two mandatory representations. Fix: Always open with responsibility for the financial statements and completeness of information and transactions.
Saying the auditor signs the letter or that it comes from the auditor. Fix: Remember: representation letter goes from management to the auditor. The auditor requests it.
Stating the letter can be dated after the audit report. Fix: It must be dated no later than the report date. Hold the signed letter before signing the report.

Exam tips

Always give both purposes: responsibilities and support for other evidence. Many students give only one and lose marks.
In objective questions, any option saying representations replace other evidence or are independent is almost always wrong.
Use scenario facts. If management is the only source of evidence for something that could be tested, say that more evidence is needed.
Keep points short and separate. One reason per point earns the mark more reliably than long paragraphs.
Always open a 'contents of the letter' answer with the two mandatory representations. These are easy marks.
Make every other representation scenario-specific. Quote the fact, then the representation.
Add a line stating that representations are not sufficient evidence alone. Examiners reward this.
For objective test questions, check who provides the letter (management) and the date rule (not after the report date).