M9-Written Representations

Question 1

The representation letter should include management’s belief that the effects of any uncorrected financial statement misstatements aggregated by the auditor during the current engagement and pertaining to the latest period presented are immaterial, both individually and in the aggregate, to the financial statements taken as a whole. (true or false)

Answer 1

true

Question 2

The statement concerning disclosure of non-compliance with laws and regulations would appear in the management representation letter. (true or false)

Answer 2

true

Question 3

Because the auditor is concerned with events occurring through the date of the audit report that may require adjustment to or disclosure in the financial statements, the management representation letter should be dated as of the date of the auditor’s report. (true or false)

Answer 3

true

Question 4

The purpose of the management representation letter is to confirm management’s oral evidence supplied during the engagement. Specific written representations obtained by the auditor might include acknowledgment that all compensating balances or other restrictions on cash have been disclosed. (true or false)

Answer 4

true

Question 5

It is appropriate for the representation letter to contain a statement regarding subsequent events. (true or false)

Answer 5

true

Question 6

The management representation letter should disclose that the effects of all known or possible litigation and claims have been accounted for and disclosed in accordance with US GAAP. (true or false)

Answer 6

true

Question 7

Materiality limits do not apply to client representations involving management fraud. The management representation letter generally indicates that “we have no knowledge of fraud or suspected fraud involving management” (without reference to materiality). The only mention of material fraud relates to situations involving parties other than management. (true or false)

Answer 7

true

Question 8

Management acknowledges its responsibility for the design of controls to detect and prevent fraud in its management representation letter. (true or false)

Answer 8

true

Question 9

Specific written representations obtained by the auditor should include a statement that the significant assumptions used by management in making accounting estimates are reasonable. (true or false)

Answer 9

true

Question 10

Management’s refusal to furnish a written representation letter constitutes a limitation on the scope sufficient to preclude an unmodified opinion. (true or false)

Answer 10

true

Question 11

Management representation letters need to address all of the years being covered in the report. (true or false)

Answer 11

true