Classification of management representations, Auditing

Classification of Management Representations

The thing to note is which during the course of the audit the auditor obtains various representations from the management which can be classification into three types:

a. Not material to the financial statements.  Examples being queries on errors in book-keeping  or absent documents or

b. Capable of being corroborated through other evidence or

c. Where the knowledge of the facts is confined to the management.  As for example, the management's purpose to close down a most important branch and whether the matter is principally one of judgement and opinion for example the reliability of obsolete stock.

In (a) there is no use for the auditor to obtain separate written representations through the management (b) and.  In (c) however, the auditor should:

A. Make certain which there is no conflicting evidence

B. If he is unable to obtain corroborating evidence, rather then the auditor should get a written confirmation from the management of any representations made.

C. The auditor must decide for himself whether the total of other evidence and the management's written representation are sufficient for him to form an unqualified opinion.

The process adopted is clearly stated in ISA 580. Thus the letter should not involve routine matters but merely matters that are material to the financial statements and the auditor cannot find independent corroborating evidence.  So please notice that the letter of representation is basically one more piece of evidence and the auditor should not rely on it rashly perhaps there are times it is the merely source of evidence unlock to the auditor. Whether a representation through management is contradicted through other audit evidence, the auditor should investigate the circumstances and, where essential, reconsider the reliability of other representations made through management.

Posted Date: 1/24/2013 7:41:53 AM | Location : United States







Related Discussions:- Classification of management representations, Assignment Help, Ask Question on Classification of management representations, Get Answer, Expert's Help, Classification of management representations Discussions

Write discussion on Classification of management representations
Your posts are moderated
Related Questions

Beneficial Ownership - Audit Process We have to examine documents of title as e.g. title motor vehicles, deeds and log books.  Whether there are no implied ownership can suffi

WHAT OF COST OF JOURNAL ENTRY?

I have a auditing case study i need to complete in chapter 8 of Auditing & Assurance service (fifteenth edition) by Alvin A. Arens, Randal J. Elder and Mark S. Beasley. I don''t kn

Documentation of Representations by Management The auditor would ordinarily involve in audit working papers evidence of management's representations in form of a summary of or

Preferred stock valuation 1. Features of preferred stock (You may review what you've learned about preferred stock from TCA 221): a. Multiple classes in terms of convertibil

How do internal auditors add to the credibility of financial statements?

Question : (a) Describe the following terms: 1) Forensic Accounting; 2) Forensic Investigation; 3) Forensic Auditing. (b) Explain the basic elements to consider for

Sales are shipped FOB shipping point with credit terms n/45. You have verified that the last shipping number used in 2009 was 261,336 and that numbers were used in numerical order.

Summary of IAS 2 Inventories are measured at the lower of cost and net realizable value. Entire realizable price is the calculated selling price in the regular course of busin