QB Chapter 12 Written representation Flashcards
According to ISA (UK) 580, Written Representations which three of the following is an
auditor required to confirm in writing with management?
A Management’s belief that it has fulfilled its responsibility for the preparation of financial
statements
B All transactions have been reflected in the financial statements
C The fact that management has provided the auditor with all relevant information
D Management’s agreement of the level of materiality used during the audit
A,B,C
Option D is not correct as the level of materiality used during the audit is the
responsibility of the auditors.
According to ISA (UK) 580, Written Representations which two of the following must
auditors obtain written representations about?
A Material matters where other evidence cannot reasonably be expected to exist
B Material matters where other evidence is missing due to an emergency such as a fire
C Management’s belief that it has fulfilled its responsibility for the preparation of the
financial statements
D That the financial statements record and reflect all transactions
C,D Auditors may only obtain written representations to support other audit evidence
(ISA 580 paragraph 13).
Where evidence is missing due to a fire, this is not a matter to obtain a written
representation on but is an inability to obtain sufficient appropriate audit evidence.
For each of the following statements concerning written representations, select whether
they are true or false.
The auditor should evaluate whether the representations appear reliable and are consistent
with other evidence obtained before they are relied on as audit evidence.
A True
B False
Written representations are appropriate evidence when evidence the auditors expected to
be available is unavailable.
C True
D False
If written representations given do not agree with other evidence, auditors should not trust
any other representations made by management during the course of the audit.
E True
F False
A,D,F
Statement 2 is false as this is an inability to obtain sufficient appropriate audit evidence.
Statement 3 is also false because if written representations are inconsistent with other
audit evidence, the auditor shall perform audit procedures to attempt to resolve the
matter. If the matter remains unresolved, the auditor shall reconsider the assessment of
management.
vAuditors seek written representations from management to support oral representations
that have been made during the course of the audit.
For each of the following in relation to a statutory audit, select whether a written
representation is required or not required.
The directors have fulfilled their responsibility for the preparation of the financial
statements.
A Required
B Not required
The accounting policies selected and applied by management are appropriate.
C Required
D Not required
A material item, subject to management judgement, for which no other evidence could
reasonably be expected to exist
E Required
F Not required
A,D,F
Specific written representations may include confirmation from management that
accounting policies selected are appropriate, but this is not compulsory.
Auditors may only obtain written representations to support other audit evidence
(ISA 580 paragraph 13).
Written representations may be sought as audit evidence.
Which two of the following are valid circumstances in which written representations may be
required?
A To support other evidence about the suitability of accounting policies
B Where information which would normally be expected to be available is unavailable
C To support inspection of a board minute introducing the directors’ intention to sell a
material investment
D When the alternative audit procedure would be too time consuming
A,C The other two options would not be valid circumstances in which to seek written
representations. If information normally expected to be available is unavailable, this
would indicate an inability to obtain sufficient appropriate audit evidence. The fact that
an alternative audit procedure is time-consuming is not a reason to seek a written
representation – a written representation cannot act as a substitute for other evidence
which is expected to exist.
On which two of the following matters should an auditor seek written representations?
A Whether there are plans to abandon product lines that will result in obsolete inventory
B Whether plant and equipment held on the client’s premises exists
C The existence (or not) of reconciling items between the cash balance and the bank
statement balance
D Whether there are any undisclosed subsequent events
A,D The auditor should be able to obtain sufficient alternative evidence regarding the
existence of plant and equipment and reconciling items on the cash account.
For each of the following statements concerning written representation letters, select
whether they are true or false.
A written representation letter is only required for new clients.
A True
B False
The written representation letter must be dated before the auditor’s report.
C True
D False
The written representation letter must include a list of all uncorrected misstatements.
E True
F False
B,C,E
Written representation letters are required on an annual basis so that representations
are valid for each specific audit. They should be dated before (although not much
before) the auditor’s report as they form part of the audit evidence on which the
auditor is relying to reach his opinion. The written representation letter must include a
list of all uncorrected misstatements as per ISA 450. It shall also include a statement
that the directors believe the total of uncorrected misstatements to be immaterial to
the financial statements as a whole.
For each of the following statements concerning written representation letters, select
whether they are true or false.
Written confirmations are required from all client staff who have made oral representations.
A True
B False
The matters to be referred to in the written representation letter shall be discussed by the
auditor with senior management.
C True
D False
Written representations can be used as a substitute for evidence which would be available
to the auditor by other means.
E True
F False
B,C,F
It is usually only of senior management that auditors request written representations as
they are responsible for matters of judgement, cooperating with the auditors etc.
Written representations cannot be used as a substitute for other evidence that is
expected to be available.
Which two of the following are purposes of a written representation letter?
A Acknowledgement that management has fulfilled its responsibility for the preparation
of the financial statements
B Provision of evidence in respect of material items where other evidence is available
C Acknowledgement by management of its belief that the aggregate of uncorrected
misstatements are immaterial to the financial statements
D Confirmation by management of the scope of the work to be carried out by the
assurance firm
E Provision of details of proposed modifications to the auditor’s report
A,C Acknowledgement that management has fulfilled its responsibility for the preparation
of the financial statements and acknowledgement by management of its belief that the
aggregate of uncorrected misstatements are immaterial to the financial statements are
the two purposes of the written representation letter from the list provided.
Where other evidence is available on a matter, the written representation letter does
not serve to provide evidence. Management’s confirmation of the scope of the work to
be carried out is included in an engagement letter. SAMPLE PAPER
ISA (UK) 580, Written Representations deals with the auditor’s responsibility to obtain
written representations from management and, where appropriate, those charged with
governance of an audited entity.
Which three of the following are included in the definition of management in this context?
A Persons with executive responsibility for the conduct of the entity’s operations
B An owner-manager
C Executive members of a governance board
D Majority shareholders
A,B,C
Majority shareholders may have some executive responsibility, but this is expected to
be considered in the same category as an owner-manager. The remaining options are
all included in the category of management or those charged with governance.
Shareholders are usually excluded from this as they have no executive responsibility
Which one of the following ISAs (UK) is not normally referred to in a standard written
representation letter from management?
A ISA (UK) 240, The Auditor’s Responsibilities Relating to Fraud in an Audit of Financial
Statements
B ISA (UK) 300, Planning an Audit of Financial Statements
C ISA (UK) 550, Related Parties
D ISA (UK) 560, Subsequent Events
B ISA (UK) 300, Planning an Audit of Financial Statements is not referred to in a written
representation letter as it relates to how the auditor plans the audit, which is beyond
the scope of management and those charged with governance of an audited entity.
Fraud, related parties and subsequent events are all areas where the auditor has a
responsibility to receive representations from management regarding specific aspects
of the audit.
