Chapter 20

Question 1

Define Written Representation.

Answer 1

Written Representation is a written statement by management to auditor:

1. to confirm management’s responsibilities.
2. to support other evidences.

Question 2

From whom Written Representation is Obtained.

Answer 2

Written Representation are obtained from management who are responsible for preparation of F/S and has relevant knowledge ( CEO,CFO and other equivalent persons)

Question 3

Date of Written Representation.

Answer 3

1. As near as possible to the date of auditor’s report.
2. If a Written Representation is obtained during audit, an updated Written Representation shall also be obtained at the end of audit.

Question 4

Period covered by Written Representation.

Answer 4

1. Written Representation shall be for the period covered by auditor’s report.
2. If current management was not present during whole period, requirement to obtain Written Representation still applies.

Question 5

Form of Written Representation

Answer 5

It is obtained in the form of representation letter, addressed to auditor.

Question 6

Written Representation required by ISA’s

Answer 6

1. Written Representation about Management’s Responsibilities.
2. Other Representations.

Question 7

Written Representation about Management’s Responsibilities.

Answer 7

1. About Preparation of F/S.

2. About information provided, and Completeness of transactions.

Question 8

Written Representation about other matters.

Answer 8

1. Assumptions & Estimates
2. Related Parties
3. Subsequent Events
4. Immaterial Misstatements
5. Fraud
6. Non-compliance with laws.
7. Litigations
8. Going Concern

Question 9

Other Written Representations considered necessary by auditor.

Answer 9

1. Representation regarding intentions, plans and judgments of Management about future course of action.
2. Representations regarding completeness of liabilities, mortgage/charge on assets.

Question 10

Written Representation on Fraud.

Answer 10

1. Results of Risk assessment relating to fraud.
2. Fraud or suspected fraud that management is aware and that affects the entity whether involving management, employees and others.
3. Alleged fraud communicated by others.

Question 11

Auditor’s course of action if Written Representation about management responsibilities Is not provided.

Answer 11

Auditor is unable to obtain evidence, effect is pervasive. Auditor shall express Disclaimer of Opinion.

Question 12

Auditor Course of Action if Written Representation about other matters is not provided.

Answer 12

1. Auditor is unable to obtain evidence. Qualified opinion (Material) and Disclaimer of Opinion (pervasive).
2. Auditor shall re-assess integrity of management and shall determine its impact on other representations and evidences.

Question 13

Evaluation of Reliability of Written Representation.

Answer 13

Auditor shall consider following:

1. Consistency of Written Representation with other evidence.
2. Competence and integrity of Management.

Question 14

Auditor’s course of action if Written Representation is inconsistent with other evidences.

Answer 14

1. Risk of misstatement increases. Auditor shall discuss this matter with management and shall perform procedures to resolve these matters.
2. If matter remains unresolved, auditor shall re-assess competence, integrity of management and its effect on reliability of representation and other evidences.

Question 15

Auditor’s course of action if auditor has concerns about competence and integrity of Management on Written Representation.

Answer 15

1. This may affect reliability of representation and other evidences.
2. if auditor has concerns about competence and integrity of Management, and risk of management misrepresentation is high, auditor may withdraw from engagement unless TCWG take appropriate actions.

Question 16

When a Written Representation is Appropriate.

Answer 16

When it is required by ISA or considered necessary by auditor.

Question 17

When Written Representation is not Appropriate.

Answer 17

In case of Material Misstatement or scope limitation.

Question 18

Effect of Written Representation.

Answer 18

1. Effect of Written Representation on Management responsibilities is always Pervasive.
2. Effect of other Representations may be material or pervasive.

Question 19

Define Subsequent Events.

Answer 19

Subsequent Events are events that arose b/w Date of F/S and Date of Auditor’s Report.

Question 20

Important Dates Sequences.

Answer 20

1. Date of F/S ( Year End).
2. Date of Auditor’s Report and Date of Authorization for issuance of F/S.
3. Date of Issuance of F/S.

Question 21

Auditor Responsibilities for Subsequent Events till Date of Auditor’s Report.

Answer 21

Auditor is responsible for Active review. Auditor shall perform procedures to identify subsequent events affecting F/S till date of Auditor’s Report.

Question 22

Auditor Procedures to identify Subsequent Events till Date of Auditor’s Report.

Answer 22

1. Obtain understanding of management procedures .
2. Inquire of MGT and TCWG.
3. Read minutes of meeting.
4. Read interim F/S.
5. Obtain Written Representation.
6. Other Procedures.

Question 23

Auditor’s responsibilities for subsequent events identified after auditor’s report but before issue of F/S.

Answer 23

Auditor himself doesn’t perform procedures to identify subsequent events. However, if and event is identified from other sources, auditor shall discuss this matter with mgt/TCWG and inquire about their intention to address this matter.

Question 24

Auditor’s procedures for subsequent events identified after auditor’s report but before issue of F/S and MGT amend F/S.

Answer 24

1. Perform procedures on amendments.
2. Issue a new audit report on amended F/S.
3. New audit report shall be dated on/after the date of approval amended F/S.
4. Auditor shall extend his active review of Subsequent events till the date of new audit report.

Question 25

Auditor’s procedures for subsequent events identified after auditor’s report but before issue of F/S and MGT doesn’t amend F/S.

Answer 25

1. If audit report has not been provided to entity, auditor shall modify his opinion and provide it to entity
2. If report has been provided to entity:
   i. Auditor shall notify the MGT/TCWG not to issue F/S Without amendments.
   ii. if despite such notification, MGT issue F/S , the auditor shall obtain legal advise and shall take appropriate measures to prevent users from relying on this report.

Question 26

Auditor’s Responsibilities if Subsequent events are identified after issuance of F/S.

Answer 26

If subsequent events occurred before audit report but are identified after issue of F/S, auditor shall ensure that F/S and audit report are amended.
Auditor shall discuss this matter with MGT/TCWG and inquire about their intention to address this matter in F/S.

Question 27

Auditor’s procedures if Subsequent events are identified after issuance of F/S and MGT amend F/S.

Answer 27

1. Auditor shall review the steps taken by MGT/TCWG to ensure that misstatement in F/S is communicated to users.
2. Auditor shall carry out necessary audit procedures on amendments.
3. Issue new audit report on amended F/S.
4. New audit report should be dated on or after date of approval of amended F/S by director.
5. Extend his procedures on active review to subsequent events upto the date of new audit report.
6. New audit report shall include and EOM/ OM paragraph which shall state reasons why F/S are revised.

Question 28

Auditor’s procedures if Subsequent events are identified after issuance of F/S and MGT doesn’t amend F/S.

Answer 28

1. Auditor shall notify MGT/TCWG that auditor shall seek actions to prevent users from relying on this audit report.
2. If despite such notification, MGT/TCWG do not take necessary steps to communicate misstatement in F/S to users. Auditor shall take appropriate measures to communicate this matter to users if F/S.