management representation letter format for valuation

Management Representation Letter: Format, Content, Signature

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As of 2019, the FASB requires publicly traded companies to prepare financial statements following the Generally Accepted Accounting Principles (GAAP). Auditors are required by professional standards to report, in writing, internal control matters that they believe should be brought to the attention of those charged with governance (the board). Generally, if your auditor is going to put an internal control matter in a letter, they have assessed that the matter was the result of a deficiency in internal controls. This is an important part of that audit that the profession does not take lightly.

One common example of a deficiency in internal control that’s severe enough to be considered a material weakness or significant deficiency is when an organization lacks the knowledge and training to prepare its own financial statements, including footnote disclosures. The “SAS 115” letter is usually issued when any significant deficiencies or material weaknesses would have been discussed with management during the audit, but are not required to be communicated in written form. In performing an audit of your Plan’s internal controls and plan financials, your auditors are required to obtain an understanding of the Plan’s operations and internal controls.

A management representation letter is a form letter written by a company’s external auditors, which is signed by senior company management. The letter attests to the accuracy of the financial statements that the company has submitted to the auditors for their analysis. The CEO and the most senior accounting person (such as the CFO) are usually required to sign the letter. The letter is signed following the completion of audit fieldwork, and before the financial statements are issued along with the auditor’s opinion. External auditors follow a set of standards different from that of the company or organization hiring them to do the work.

In doing so, they may become aware of matters related to your Plan’s internal control that may be considered deficiencies, significant deficiencies, or material weaknesses. Audits performed by outside parties can be extremely helpful in removing any bias in reviewing the state of a company’s financials. Financial audits seek to identify if there are any material misstatements in the financial statements. An unqualified, or clean, auditor’s opinion provides financial statement users with confidence that the financials are both accurate and complete. External audits, therefore, allow stakeholders to make better, more informed decisions related to the company being audited.

The representation should reaffirm your client’s understanding of all significant terms in the engagement letter. A relevant assertion is a financial statement assertion that has a reasonable possibility of containing a misstatement or misstatements that would cause the financial statements to be materially misstated.

The purpose of an internal audit is to ensure compliance with laws and regulations and to help maintain accurate and timely financial reporting and data collection. It also provides a benefit to management by identifying flaws in internal control or financial reporting prior to its review by external auditors.

Depending on materiality and other qualitative factors, the auditors will consider the deficiency to be an “other” matter, significant deficiency, or material weakness. The auditor has discretion on which category the deficiency falls into, but are otherwise required to use the standard wording and definitions in the letter.

It serves to document management’s representations during the audit, reducing misunderstandings of management’s responsibilities for the financial statements. The definition of good internal controls is that they allow errors and other misstatements to be prevented or detected and corrected by (the nonprofit’s) employees in the normal course of performing their duties.

Material weaknesses or significant deficiencies may exist that were not identified during the audit, and auditors are required to disclose this in their written communication. The auditor’s report contains the auditor’s opinion on whether a company’s financial statements comply with accounting standards. The results of the internal audit are used to make managerial changes and improvements to internal controls.

What is a management representation letter?

A management representation letter is a form letter written by a company’s external auditors, which is signed by senior company management. The letter attests to the accuracy of the financial statements that the company has submitted to the auditors for their analysis.

A control objective provides a specific target against which to evaluate the effectiveness of controls. Management representation is a letter issued by a client to the auditor in writing as part of audit evidences. The representations letter must cover all periods encompassed by the audit report, and must be dated the same date of audit work completion.

These types of auditors are used when an organization doesn’t have the in-house resources to audit certain parts of their own operations. The assertion of completeness is an assertion that the financial statements are thorough and include every item that should be included in the statement for a given accounting period. The assertion of completeness also states that a company’s entire inventory, even inventory that may be temporarily in the possession of a third party, is included in the total inventory figure appearing on a financial statement. The compilation standards do not require practitioners to obtain a management representation letter, but this does not mean that it’s not a prudent thing to do. Obtaining a representation letter helps to ensure your client understands the services that you have provided, the limitations on the work you have completed, and that they are ultimately responsible for their financial statements.

The biggest difference between an internal and external audit is the concept of independence of the external auditor. When audits are performed by third parties, the resulting auditor’s opinion expressed on items being audited (a company’s financials, internal controls, or a system) can be candid and honest without it affecting daily work relationships within the company. Auditors evaluate each internal control deficiency noted during the audit to determine whether the deficiency, or a combination of deficiencies, is severe enough to be considered a material weakness or significant deficiency. In assessing the deficiency, auditors consider the magnitude of potential misstatements of your financial statements as well as the likelihood that internal controls would not prevent or detect and correct the misstatements.

Representation to Management

• In an audit of financial statements, professional standards require that auditors obtain an understanding of internal controls to the extent necessary to plan the audit.
• written confirmation from management to the auditor about the fairness of various financial statement elements.
• Auditors use this understanding of internal controls to assess the risk of material misstatement of the financial statements and to design appropriate audit procedures to minimize that risk.

The idea behind a management representation letter is to take away some of the legal burdens of delivering wrong financial statements from the auditor to the company. A material weakness is a deficiency, or combination of deficiencies, in internal control, such that there is a reasonable possibility that a material misstatement of the entity’s financial statements will not be prevented, or detected and corrected on a timely basis. Internal auditors are employed by the company or organization for whom they are performing an audit, and the resulting audit report is given directly to management and the board of directors. Consultant auditors, while not employed internally, use the standards of the company they are auditing as opposed to a separate set of standards.

If the auditors detect an unexpected material misstatement during your audit, it could indicate that your internal controls are not functioning properly. Conversely, lack of an actual misstatement doesn’t necessarily mean that your internal controls are working.

The determination of whether an assertion is a relevant assertion is based on inherent risk, without regard to the effect of controls. Financial statements and related disclosures refers to a company’s financial statements and notes to the financial statements as presented in accordance with generally accepted accounting principles (“GAAP”). References to financial statements and related disclosures do not extend to the preparation of management’s discussion and analysis or other similar financial information presented outside a company’s GAAP-basis financial statements and notes.

External audits can include a review of both financial statements and a company’s internal controls. When a company’s financial statements are audited, the principal element an auditor reviews is the reliability of the financial statement assertions. In the United States, the Financial Accounting Standards Board (FASB) establishes the accounting standards that companies must follow when preparing their financial statements.

In an audit of financial statements, professional standards require that auditors obtain an understanding of internal controls to the extent necessary to plan the audit. Auditors use this understanding of internal controls to assess the risk of material misstatement of the financial statements and to design appropriate audit procedures to minimize that risk. written confirmation from management to the auditor about the fairness of various financial statement elements. The purpose of the letter is to emphasize that the financial statements are management’s representations, and thus management has the primary responsibility for their accuracy.

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This letter is useful for setting the expectations of both parties to the arrangement. Almost all companies receive a yearly audit of their financial statements, such as the income statement, balance sheet, and cash flow statement. Lenders often require the results of an external audit annually as part of their debt covenants. For some companies, audits are a legal requirement due to the compelling incentives to intentionally misstate financial information in an attempt to commit fraud.

Management representation letter

As long as there’s a reasonable possibility for material misstatement of account balances or financial statement disclosures, your internal controls are considered to be deficient. An auditor typically will not issue an opinion on a company’s financial statements without first receiving a signed management representation letter. An audit engagement is an arrangement that an auditor has with a client to perform an audit of the client’s accounting records and financial statements. The term usually applies to the contractual arrangement between the two parties, rather than the full set of auditing tasks that the auditor will perform. To create an engagement, the two parties meet to discuss the services needed by the client.

As a result of the Sarbanes-Oxley Act (SOX) of 2002, publicly traded companies must also receive an evaluation of the effectiveness of their internal controls. As noted above, an internal control letter is usually the result of a deficiency in internal controls discovered during the audit, most commonly from a material audit adjustment. The letter includes required language regarding the severity of the deficiency.

Real Business Owners,

The parties then agree on the services to be provided, along with a price and the period during which the audit will be conducted. This information is stated in an engagement letter, which is prepared by the auditor and sent to the client. If the client agrees with the terms of the letter, a person authorized to do so signs the letter and returns a copy to the auditor. By doing so, the parties indicate that an audit engagement has been initiated.

Also, the letter provides supplementary audit evidence of an internal nature by giving formal management replies to auditor questions regarding matters that did not come to the auditor’s attention in performing audit procedures. Some auditors request written representations of all financial statement items. All auditors require representations regarding receivables, inventories, plant and equipment, liabilities, and subsequent events. The letter is required at the completion of the audit fieldwork and prior to issuance of the financial statements with the auditor’s opinion.

Auditors spend a lot of time assessing how material audit adjustments and immaterial adjustments that have the potential to be material will be communicated in the internal control letter. The Representation Letter is issued with the draft audit and is required by auditing standards to finalize the audit. The Representation Letter is a letter from the Association to our firm confirming responsibilities of the board and management for the financial statements, as well as confirming information provided to us during the audit. The President or Treasurer and Management need to sign the Representation Letter and return it back to our office within 60 days from the date the draft audit was issued. Representation Letters received after the 60-day mark may result in additional auditing procedures in order to finalize the audit and comply with auditing standards at an additional expense to the Association.

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Detailed Format of a Management Representation Letter

Format of a management representation letter (mrl).

Chartered Accountants Dear Sirs, This representation letter is provided in connection with your audit of the financial statement of M/s. …….for the year ended 31st March 2020 for the purpose of expressing an opinion as to whether the financial statements give a true and fair view of the financial position of M/s. …….as of 31st March 2020 and of the results of operations for the year then ended. We acknowledge our responsibility for the preparation of financial statements in accordance with the requirements of the other relevant statute and recognized accounting policies and practices, including the accounting standards issued by The Companies Act 2013/ The Institute of Chartered Accountants of India.

We confirm, to the best of our knowledge and belief, the following representations; General ___________________________ 1. Ours ‘…….is a limited company incorporated under the Companies Act, 1956/2013 bearing Regn. No CIN: ……………..dated …….. as Private Limited Company and converted into Public Limited Company on ………….. A copy of the Memorandum & Articles of Association is already with you. 2. Following persons are the members of the Board of Directors of the Company as on date:- Name of Director:- Designation;- Director Date of appointment Name of Director:- Designation; – Director Date of appointment Name of Director:- Designation; – Director Date of appointment Name of Director:- Designation;- Director Date of appointment Name of Director:- Designation;- Director Date of appointment 3. The Company has obtained all registrations/licenses required to run the business. 4. So far the Company had filed I.T. Return for the FY ending March …… No income tax return has been filed by the Company after the AY . PAN of the Company is ……. There are no demands/ appeals pending or details of appeals/demands pending are as under:- All the Statutory Compliance like VAT, Service Tax, GST, PF, ESIC, etc, has been paid timely and there is no default there, except the following:

5. We have maintained the following books of account:-

(a)Cash book (b) Bank Book (c) Ledger (d) Journal All the books have been kept on the computer and printouts are taken on a monthly/yearly basis as per needs. All the aforesaid books have been kept and maintained at the corporate office of the Company. 6. We enclose herewith a copy of final accounts for the year-ended ……… duly approved by the Board of Directors of the Company, for your perusal and doing the needful.

Related Topic: Private Company – Specimen Audit Report March 2020

7. Significant Accounting Policies

a) Basis of preparation The financial statements are prepared on an accrual basis under the historical cost convention, in accordance with the generally accepted accounting principles (Indian GAAP) to comply with the Accounting Standards notified under the Companies (Accounting Standards) Rules, 2006 (as amended) and the relevant provisions of the Companies Act. The accounting policies adopted in the preparation of the financial statements are consistent with those followed in the previous year. b) Use of estimates The preparation of financial statements in conformity with the Indian GAAP requires management to make estimates and assumptions that affect the reported amount of assets and liabilities (including contingent liabilities) and the reported income and expenses during the year. Management believes that the estimates used in the preparation of the financial statements are prudent and reasonable. Future results could differ due to these estimates and the differences between the actual results and the estimates are recognized in the periods in which the results are known/materialize. c) Revenue recognition Revenue is recognized on an “accrual” basis at the fair value of the consideration received or receivable net of applicable taxes, trade discounts, and customer returns. d) Secured Loans 1) The term loan from Financial Institutions i.e. ……….. are secured by the first charge ranking parri-passu in each case with the others by way of Equitable Mortgage by the deposit of the deeds in respect of the land situated ………………………. & by hypothecation of all the movable (save and except book debts) including immovable machinery, spares & accessories, Both present and future, subject to prior charge created in favour of the company’s banker on stock of raw material, semi-finished goods, finished goods & consumable stores and book debts for securing the cash credit for the working capital requirement. 2) All loans are guaranteed by all the promoters/shareholders of the company. e) Fixed assets Fixed assets are carried at cost less accumulated depreciation and impairment losses if any. The cost of fixed assets includes interest on borrowings attributable to the acquisition of qualifying fixed assets up to the date the asset is ready for its intended use and other incidental expenses incurred up to that date. f) Depreciation / amortization All the Company’s fixed assets including Intangible assets are depreciated on the basis of the Written Down method over the estimated useful life of the asset as per the provisions of the Companies Act, 2013. Leasehold improvements, Office Equipments, Furniture & Fixtures & Software are amortized over the useful life of the assets as specified under Company’s Act 2013. g) Foreign exchange transactions Transactions in foreign currency are recorded in the reporting currency by applying to the foreign currency amount the exchange rate between the reporting currency and the foreign currency prevailing on the date of the transaction. Monetary items denominated in foreign currency are restated at the rates prevailing on the balance sheet date. Non-monetary items denominated in foreign currency which are carried at historical cost are reported using the exchange rate at the date of the transaction. Exchange differences arising on the settlement of monetary items or on reporting company’s monetary items at rates different from those at which they were initially recorded during the year or reported in the previous financial statements are recognized as income or expense in the year in which they arise. h) Earnings per share Basic earnings/loss per share is calculated by dividing net profit/loss for the year attributable to equity shareholders by the weighted average number of equity shares outstanding during the year. i) Taxation Tax expense comprises current tax and deferred tax. Current tax is determined as the amount of tax payable in respect of taxable income for the year. The provision for current income-tax is recorded based on assessable income and the tax rate applicable to the relevant assessment year. Minimum Alternate Tax (MAT) credit is recognized as an asset only when and to the extent there is convincing evidence that the Company will pay normal income tax during the specified period. In the year in which MAT credit becomes eligible to be recognized as an asset in accordance with the recommendations contained in the guidance note issued by the Institute of Chartered Accountants of India, the said asset is created by way of a credit to the profit and loss account and shown as MAT credit entitlement. The Company is carrying/carrying any business since …….. Income Tax Returns have been/not been filed from AY ……. There is no reasonable certainty of the realization of future profits based on the Profits & Loss Account of the earlier years. Therefore, no provision for Deferred Tax has been made under the prevailing circumstances. j) Investments: Long term investments are carried at cost after providing for any diminution in value if such diminution is of a permanent nature. Current investments are carried at lower of cost or market value. k) Loans & Advances Security deposits with of Rs. – will be adjusted by the …………… against the outstanding bill ………………………..hence not recoverable. l) Inventories: There are no inventories in the Balance Sheet. m) Borrowing Cost: Interest and other financing costs relating to borrowed funds attributable to the construction or acquisition of fixed assets have been capitalized to the extent if they relate to the period up to which the asset was ready to use (As per AS-16). All other borrowing costs are charged to revenue. n) Employee Benefits:

LEAVE ENCASHMENT

There are ………/s no employee. Accordingly, provisions have been made as per AS-15../hence this clause is not applicable. PROVIDENT FUND REgular in payment of dues/There is no employee hence this clause is not applicable. GRATUITY There are …… employees/is no employee hence this clause is not applicable. Provision made on the basis of actuarial valuation o) CONTINGENT LIABILITIES: A) Corporate Guarantees B)Capital Commitments .. The company has become a sick company within the meaning of clause (o) of sub-section 1 of section 3 of the sick industrial companies (special provision) act, 1985. The matter under consideration at BIFR/AIIFR for the revival process has been rejected by the Hon’ble BIFR. The interest of Rs…………. has not been provided on the term loans of …………..because OTS (ONE TIME SETTLEMENT) has been revoked due to nonpayment as per the OTS scheme. However, interest has been provided on the term loan of ……………… as per OTS Settlement and statement of account provided by the ……………….. B) The sales tax authorities have raised a demand of Rs ………………………The above demand is not acceptable and it has been challenged by the Company in Appeal. The appeal is pending before the authorities. Although the company has provided a liability of Rs. …………- in the books of accounts but from the prevailing circumstances the amount of Rs. ……………… appears to be a contingent liability.

8 NOTES ON ACCOUNTS

Micro and Medium Scale Business Entities: There are no Micro, Small, and Medium Enterprises, to whom the company owes dues which are outstanding for more than 45 days as at 31st March 2020. This information as required to be disclosed under the Micro, Small and Medium Development Act, 2006 has been determined to the extent such parties have been identified on the basis of information available with the Company. B The Company is a Small and Medium-Sized Company (SMC) as defined in the General Instructions in respect of Accounting Standard notified under the Companies Act, 2013, accordingly, the company has complied with the accounting standard as applicable to a Small and Medium-Sized Company. C In the absence of confirmation from the parties the debit & credit balances in respect of Security Deposits and have been taken as reflected in the books. Balance appearing under the heads Current Assets, Loans and Advances, and Current Liabilities are subject to confirmation. D In the opinion of the Board of Directors of the company, the current assets, loans, and advances have the value at least equal to the figures stated in the Balance Sheet on realization in the ordinary course of business and provision for all determinable/known liabilities have been made in the accounts when reliable estimates can be made of the amount of obligation. F Previous year Figures have been reworked, regrouped, re-arranged, and reclassified wherever considered necessary to make them comparable with current year’s figures. G There has been no default except Default of Principal repayment and interest repayment on Long Term Borrowings from ……………….. The figures have been quantified in the balance sheet.

i. There have been no irregularities involving management or employees who have a significant role in the system of internal control that could have a material effect on the financial statements. ii. The financial statements are free of material misstatements, including omissions. iii. We have complied with all the relevant provisions of the statute as applicable to us and our records and minutes in this respect are up to date and are open for inspection in the course of your audit. iv. The company has complied with all aspects of contractual agreements that could have a material effect on the financial statements in the event of noncompliance. There has been no non-compliance with requirements of regulatory authorities that could have a material effect on the financial statements in the event of non-compliance. v. We have no plans or intentions that may materially affect the carrying value or classification of assets and liabilities reflected in the financial statements. vi. All the loans or depositor repayment thereof was made by account payee Cheques or demand draft only. vii. In term of section 22 of the micro, Small & Medium Enterprises Development Act, 2006: Sundry Creditors of the Company: Rs.NIL Interest Paid to them: Rs. NIL viii. We have complied with tax provisions in respect of the deduction of TDS. ix. All the payments in the respect of any revenue item has been made in compliance with the provisions of section 40(A)(3) of the Income Tax Act 1961. x. Details of all immovable Properties Purchased/Sold during the years are as below: Details Purchase/Sale Amount Value as per stamp duty act NIL NA NA NA

10. General Affirmations

· The Cash balance as on 31/03/2020 has been physically verified by the management at Rs. · The company has not given any guarantee for loans taken by others from banks or financial institutions. · We confirm that no short-term funds have been employed for long-term purposes. · We confirm that during the year company has not issued any shares. · We confirm that during the year company has not issued any debentures to any person. · We confirm that during the year company has not raised funds from the public issue of shares. · None of the employees of the Company were in receipt of remuneration in excess of the limits specified under various provisions of the Companies Act, 2013. · We confirm that Company has duly complied all the provisions of Section 40(A)3 of the I.T. Act, 1961, read with Rule 6DD, and has not made any payment of expenditure in excess of Rs……./- in Cash. · We confirm that Company has duly complied all the provisions of Section 269SS and 269T of the I.T. Act, 1961 and has not taken/accepted and or repaid any loans or deposits in excess of limits prescribed under these sections otherwise them through account payee Cheques and or draft as the case may be. · No personal expenses have been charged to revenue accounts. · No fraud has been committed during the year.

11. Other Information of the company:

Email id: :- Principal Contact No :- No. Of Employees: :- persons No. of Branches:- NIL 12. Others: (a) Our Books of Accounts and Other Records are kept at the corporate address of the company. (b) A bonus amounting Rs. NIL /- was paid to employees which is of customary nature. For and on behalf of the Board ……. Place: New Delhi

A chartered Accountant and a Law Graduate having more than 30 years of experience. Founder of Tri Nagar Keshav Puram CPE Study Circle of NIRC of ICAI. Have organized learning sessions covering the Syllabus for Limited Insolvency Examination in different cities and forums in Northern India.

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What is a Management Representation Letter?

Getting through financial audits can be frustrating for companies, especially when asked to provide management representation letters.

This article will clarify exactly what a management representation letter is, why auditors request them, what should be included, and provide examples to make the process smooth and compliant.

You'll learn the purpose of these letters, see template examples, understand international audit standards, and gain key takeaways to improve financial reporting at your organization.

Introduction to Management Representation Letters

A management representation letter is a formal document signed by a company's senior management that is provided to external auditors. It contains certain written representations that auditors require in order to complete an audit and form an opinion on the company's financial statements.

Defining the Management Representation Letter in Audit Context

The management representation letter serves an important role within the financial statement audit process. Auditors use it as audit evidence to support their assessment of whether the financial statements are free of material misstatement. Specifically, auditors request written confirmation from management regarding the accuracy and completeness of information provided during the audit. This includes representations related to:

• The financial statements and adequacy of disclosures
• Proper recording of transactions and account balances
• Internal controls over financial reporting
• Compliance with laws and regulations

By obtaining these written representations from management, auditors gain additional audit evidence to complete their testing and analysis. The management representation letter also outlines management's responsibilities under the audit engagement.

Essential Components of a Management Representation Letter

A standard management representation letter contains certain key statements that auditors rely upon. These include:

• Financial statement disclosures : Confirmation that management has provided the auditors with all relevant information and access needed to perform the audit.
• Recognition, measurement and disclosure : Assertion that the financial statements comply with the applicable financial reporting framework and standards.
• Non-compliance : Disclosure of any non-compliance with laws and regulations.
• Litigation and claims : Details of any actual, pending or threatened litigation and claims that could impact the financial statements.

The letter will also typically list areas of significant estimates and judgments made by management in preparing the financial statements. For example, allowances for doubtful accounts, asset impairment assessments, and assumptions used in valuation models.

By obtaining written representation on these matters, auditors gain evidence to issue their audit opinion. The management representation letter should be signed by the CEO and CFO or equivalent members of senior management.

Legal and Ethical Implications of Management Representations

Signing a management representation letter has legal and ethical implications. Management must ensure representations made to the auditors are accurate and made in good faith. Intentionally misrepresenting information or omitting relevant details could constitute fraud and result in legal liability.

Auditors also have a duty to assess the reasonableness of management representations and corroborate them with other audit evidence. Relying solely on management representations without further verification could call into question the quality of the audit.

Overall, the management representation letter facilitates open and transparent communication between management and auditors. It serves as a legally binding confirmation of management's fulfillment of its financial reporting responsibilities.

What is the main purpose of a management representation letter?

The main purpose of a management representation letter is to obtain written confirmation from management that they have fulfilled their responsibility for the fair presentation of the financial statements. This letter documents that management has provided the auditors with all relevant information and access needed to conduct the audit.

Some key purposes of the management representation letter include:

Confirming management's responsibility for the preparation and fair presentation of the financial statements in accordance with the applicable financial reporting framework (e.g. GAAP or IFRS).

Affirming that management has provided the auditors with all relevant information and access to records, documentation and personnel that is necessary for the audit.

Disclosing any instances of fraud involving management, employees with significant internal control roles, or those that cause a material misstatement of the financial statements.

Presenting details on matters that impact the financial statements - such as plans or intentions that may affect asset/liability carrying values, information about related parties, contingencies, subsequent events, etc.

Stating that all transactions have been recorded and are reflected in the financial statements. This helps confirm completeness and cut-off assertions.

So in summary, the management representation letter serves as important audit evidence that validates information provided by management to the auditors. It also formally documents management's responsibilities and representations concerning the financial statements.

What is the meaning of management representation?

Management representation refers to written confirmation provided by management of an entity to the auditors regarding the accuracy and completeness of financial statements and adequacy of internal controls.

The management representation letter is a key audit evidence prepared at the completion of the audit process. It contains management's assertions regarding:

• Fair presentation of financial statements
• Completeness of information provided to auditors
• Proper accounting policies used
• Reasonableness of significant estimates made

Essentially, through this letter, management takes responsibility for the fair presentation of the financial statements. They confirm to the auditors that they have fulfilled their financial reporting responsibilities.

The management representation letter covers all periods encompassed by the audit report and is dated the same date as the completion of audit fieldwork. It is addressed to the engagement partner and signed by those with appropriate responsibilities for the financial statements, usually the Chief Executive Officer and Chief Financial Officer.

By obtaining written representations from management, the auditors demonstrate they have obtained sufficient appropriate audit evidence to support their audit opinion. The representations serve as necessary supplementary corroboration of management's oral assertions made during the audit.

In summary, the management representation letter is a written statement from management provided to the auditors as part of the audit evidence. It confirms management's compliance with financial reporting responsibilities to enable auditors to form their audit opinion.

What is an example of a management representation letter?

We are providing this letter in connection with your audit of the cost representation statement of USAID resources managed by (Client Name) under Contract No. XXX “Project Name” for the period MM/DD/YY to MM/DD/YY.

We confirm, to the best of our knowledge and belief, the following representations made to you during your audit:

• We have made available to you all financial records and related data, including service auditor reports.
• There have been no communications from regulatory agencies concerning noncompliance with or deficiencies on financial reporting practices.
• We have no knowledge of any known or suspected fraudulent financial reporting or misappropriation of assets involving management or employees with significant roles in internal control.
• We have disclosed to you the results of our assessment of risk that the cost representation statement may be materially misstated as a result of fraud.
• There are no material transactions that have not been properly recorded in the accounting records.
• We believe the effects of any uncorrected financial statement misstatements aggregated by you are immaterial.
• We have disclosed all liabilities, both actual and contingent.
• There are no violations or possible violations of laws or regulations whose effects should be considered.

We confirm that the representations we have made to you during your audit are complete, truthful, and accurate.

Sincerely, [Signature] [Client Representative Name and Title]

What is the difference between management letter and management representation letter?

The key differences between a management letter and a management representation letter in an audit are:

Focus : The management letter focuses on identifying weaknesses and areas of improvement in the company's financial reporting process and internal controls. Management representation, on the other hand, focuses on providing evidence of management's understanding and support of the audit process.

Purpose : The purpose of a management letter is to communicate deficiencies in internal control and make suggestions for improvements. The purpose of a management representation letter is to confirm certain information that the auditors have requested from management.

Content : A management letter contains comments and recommendations from the auditor about issues encountered during the audit. A management representation letter contains specific statements by management regarding matters such as the fairness of financial statements.

Timing : A management letter is typically issued after the audit report while a management representation letter is obtained during the audit.

In summary, while both letters relate to the audit process, the management letter aims to provide suggestions for improvement while the management representation letter serves as audit evidence regarding management's assertions. The management representation letter supports the audit by confirming the accuracy of the financial statements.

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The purpose and importance of management representation letters.

Management representation letters serve several key purposes in the audit process. Most importantly, they provide additional audit evidence to support the auditor's opinion on the financial statements.

Reinforcing the Auditor's Collection of Audit Evidences

Management representation letters reinforce the audit evidence the auditor has already obtained throughout the audit. As outlined in ISA 500 Audit Evidence, auditors must obtain sufficient appropriate evidence to support their opinion. The letter serves as written representation from management on important assertions related to the financial statements. This includes the completeness and accuracy of information provided to the auditor.

Management's Accountability for Financial Reporting

Additionally, the letter highlights management's responsibilities over financial reporting. Management, not the auditor, is responsible for the preparation and fair presentation of the financial statements. The representation letter formally documents that management has fulfilled these duties, a key assertion needed to issue an audit opinion.

Assurance on Contingent and Off-Balance-Sheet Liabilities

Auditors also rely on management's representations on significant estimates and disclosures. This includes assurance from management that the financial statements appropriately reflect contingent liabilities and off-balance-sheet liabilities in accordance with the applicable financial reporting framework.

In summary, representation letters serve as a final confirmation from management that they have fulfilled their financial reporting responsibilities. The letters provide key audit evidence and accountability to support the auditor's work in accordance with auditing standards.

Drafting a Management Representation Letter: Best Practices

A management representation letter is an important part of the audit process. It documents certain written representations made by management to the auditors regarding the company's financial statements.

Drafting an effective management representation letter requires following several best practices:

Management Representation Letter Template: A Starting Point

When creating a management representation letter, it's best to start with a template. This ensures all relevant topics are covered such as:

• Management's responsibility for the preparation and fair presentation of the financial statements
• Availability of all financial records and related data
• Completeness of information provided regarding transactions and events
• Disclosure of all liabilities, both actual and contingent
• Non-existence of any fraud or illegal acts

Tailor the template to the specific circumstances and transactions of the business. But the template establishes a solid foundation.

Who Should Sign the Management Representation Letter

Typically the management representation letter should be signed by:

• The CEO or Managing Director
• The CFO or Financial Controller

This demonstrates the company's overall governance has reviewed the representations and attests to their validity and completeness.

In some cases, representation from heads of divisions or departments may also be necessary regarding transactions or activities under their specific purview.

Customizing Representations to Reflect Unique Organizational Circumstances

While a template is useful, each management representation letter must be customized to reflect the distinct transactions and activities of the organization. Specifically call out areas the auditors have highlighted as potential risks or requiring further representations.

For example, if the company underwent a major acquisition, restructuring, or system implementation, representations would be needed to address the associated impacts and risks regarding financial reporting.

The management representation letter is not a mere formality. It serves as an indispensable record of the critical dialogue between management and auditors. Following these best practices helps craft letters that clearly communicate important representations.

Management Representation Letter Samples and Examples

Management representation letters are important documents in the financial audit process. They contain written confirmation from management about the accuracy and completeness of financial statements and disclosures. Reviewing examples can help companies understand what to include in their own letters.

Analyzing a Management Representation Letter Sample

Here is an excerpt from a sample management representation letter:

We acknowledge our responsibility for the fair presentation in the financial statements of financial position, results of operations, and cash flows in conformity with U.S. generally accepted accounting principles (GAAP). We have provided you with unrestricted access to persons within the Company...

This excerpt demonstrates several key elements:

• Acknowledgment of management's responsibility for financial statements conforming to GAAP
• Confirmation that auditors had full access to people and information

Other standard inclusions are statements around contingent liabilities, litigation matters, plans or intentions that may affect assets or liabilities, and confirmation that appropriate disclosures have been made.

Analyzing examples helps identify customary terms to include.

Management Representation Letter PDF: Accessibility and Format

Management representation letters are often provided to auditors as PDF files. This locked, uneditable format:

• Facilitates easy sharing of the definitive final version
• Allows clear version control with digital signatures
• Enables reliable long-term archival storage

PDF format removes ambiguity around which representation letter version was relied upon.

Real-World Examples: Complex Issues

Consider these excerpts from real-world representation letters:

"The restructuring provision of $20 million represents our best estimate of costs to complete the plant closure based on current plans..."

"We confirm that we have properly recorded and disclosed the acquisition of Company XYZ in the financial statements..."

These excerpts demonstrate how companies transparently address complex real situations like restructurings or major transactions in the representation letter.

Real examples provide assurance that the company has appropriately considered complex accounting matters.

Comparing Management Letters and Management Representation Letters

Management letters and management representation letters serve important but distinct purposes in the audit process.

Management Letter vs Management Representation Letter: Clarifying the Distinction

A management letter communicates deficiencies or recommendations for improvement identified by the auditor during the audit. These may relate to internal controls, processes, or compliance issues that could be made more effective.

In contrast, a management representation letter obtained near the end of an audit contains specific written representations from management about the accuracy and completeness of the financial statements and disclosures. Common representations confirm that:

• Financial statements are fairly presented
• Significant assumptions used by management are reasonable
• All relevant information has been provided to the auditor
• There are no undisclosed side agreements or contingencies

While management letters offer suggestions, representation letters confirm critical facts underlying the audit.

The Role of the Auditor in Relation to Management Representations

Auditors use both tools to fulfill their responsibilities:

Management letters reflect the auditor's duty to communicate control deficiencies to those charged with governance. This allows the entity to take timely remedial action.

Representation letters provide audit evidence as part of the auditor's risk assessment procedures under auditing standards. They represent a form of documentary evidence about management's intents, knowledge and accuracy of the financial statements.

If management were unwilling to sign the representation letter, the auditor would need to reconsider their audit opinion.

Impact on Audit Opinions and Auditor's Reports

The management letter has no direct bearing on the auditor's opinion, unless the issues it raises cast doubt on the fairness of the financial statements.

However, matters raised in the representation letter directly relate to the audit evidence obtained. If management refuses to sign the letter, the auditor would likely issue a qualified opinion or disclaimer of opinion on the financial statements due to the limitation on audit scope and evidence.

In summary, while management letters offer helpful recommendations, representation letters provide the auditor written confirmation of critical information pertinent to the audit itself. Both play key roles in the audit process.

International Standards on Auditing: ISA 580 Management Representations

The International Standards on Auditing (ISA) provide a framework for conducting high quality external audits. ISA 580 specifically focuses on obtaining appropriate written representations from management to support the audit evidence gathered.

Understanding ISA 580 and Its Relevance to Management Representation Letters

ISA 580 outlines the auditor's responsibilities for obtaining written representations from management to confirm certain matters or to support other audit evidence. Some key points:

• Requires auditors to obtain written representations from management that they have fulfilled their financial reporting responsibilities
• Covers areas like recognition, measurement, presentation, and disclosure of information as per the financial reporting framework
• Helps auditors obtain confirmation on matters material to the financial statements, like the completeness of information provided
• Allows for detection of material misstatements due to fraud

By adhering to ISA 580, auditors can ensure management representation letters align with the necessary audit evidence requirements.

Compliance with International Standards on Auditing

It is critical that management representation letters comply with ISA guidelines, including:

• Obtaining representations from appropriate individuals : Those with overall responsibility for financial reporting, such as the CEO and CFO
• Written format : Printed on the organization's letterhead and signed by hand
• Date : No earlier than the date of the audit report
• Wording : Clear acknowledgement of responsibilities, accuracy of information provided, etc.

Strict compliance ensures the representations constitute valid and appropriate audit evidence as per ISA 500.

Case Studies: Adherence to ISA 580 in Practice

Company A - Drafted a management representation letter that was vague, unsigned, and outdated. By not adhering to ISA 580, they had to invest additional time and resources to obtain proper representations.

Company B - Carefully followed ISA 580 requirements. The CFO and CEO signed off on a letter confirming completeness of information and awareness of responsibilities. This aligned smoothly with the audit process.

As exemplified, non-compliance ultimately wastes time and resources. Whereas alignment with ISA 580 standards helps streamline external audits.

Conclusion and Key Takeaways

Management representation letters are important, standard audit evidence that reduce risk. They signify management's representations concerning the financial statements and accountability for internal controls, fraud, and information provided to auditors.

Summarizing the Role of Management Representation Letters in Audits

Management representation letters summarize key information and representations from management to auditors. They serve several key functions:

• Confirm management's responsibility for the preparation and fair presentation of the financial statements
• Disclose any issues or deficiencies in internal controls
• Affirm that all relevant information has been provided to auditors
• Highlight any fraud, illegal acts, or noncompliance with laws and regulations

By obtaining these written representations, auditors reduce engagement risk and confirm their understanding of management's views and positions.

Final Thoughts on Best Practices and Compliance

It is critical that management representation letters adhere to regulations and professional standards. Key best practices include:

• Ensuring the letter is dated as of the date of the auditor's report
• Having the letter signed by those with appropriate responsibilities and authority
• Disclosing all relevant issues completely and accurately
• Following the guidelines and requirements outlined in ISA 580 and other applicable standards

Diligent compliance promotes accuracy, transparency, and accountability.

Encouraging Diligence and Transparency in Financial Reporting

At their core, management representation letters aim to foster diligent, truthful, and transparent financial reporting. By eliciting key written representations from management, auditors promote an environment of responsibility, compliance, and ethical practice. This ultimately supports the accuracy and reliability of financial statements for all stakeholders.

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Letters of representation

Helpsheets and support

Published: 01 Oct 2012 Updated: 24 Jan 2022 Update History

Introduction

Requirement, audit engagements, non-audit engagements, example letter of representation, if in doubt seek advice, appendix 1: example letter of representation.

Technical helpsheet to help ICAEW members to understand the need for letters of representation in the context of auditing and to consider other situations where a letter of representation may be useful. To assist members in the preparation of letters of representation, this helpsheet also includes an example letter.

This helpsheet has been issued by ICAEW’s Technical Advisory Service to help ICAEW members to understand the need for letters of representation in the context of auditing and to consider other situations where a letter of representation may be useful. To assist members in the preparation of letters of representation, this helpsheet also includes an example letter.

Members may also wish to refer to the following related guidance:

• TECH 04/02 AAF Management representation letters: Explanatory note
• International Standards on Auditing (UK)

A word version of the sample letter of representation wording  is available to download and complete.

Written confirmation(s) of representations from management is a requirement of the International Standards on Auditing (UK) (ISAs (UK)) and is therefore required for each and every audit. They are also useful to confirm, in writing with clients, information, assumptions and accounting treatments in non-audit engagements.

A number of ISAs (UK) require written representations to be obtained from management. These must be obtained as near as practicable to, but not after, the date of the auditor’s report (ISA (UK) 580 paragraph 14) in the form of a letter addressed to the auditor (paragraph 15).

Representations are requested from management with appropriate responsibilities for the financial statements and knowledge of the matters concerned. In the UK, those charged with governance are responsible for the preparation of the financial statements.

Letters of representation can be, and often are, signed by more than one member of the audited entity’s staff – the auditor needs to make an assessment as to who is in the best position to provide the representations required. ISA (UK) 580 requires written representations from management that:

• It has fulfilled its responsibility for the preparation of the financial statements in accordance with the applicable financial reporting framework, including where relevant their fair presentation, as set out in the terms of the audit engagement (paragraph 10);
• It has provided the auditor with all relevant information and access as agreed in the terms of the audit engagement (paragraph 11(a)); and
• All transactions have been recorded and are reflected in the financial statements (paragraph 11(b)).

As well as the written representations required in ISA (UK) 580, the following ISAs (UK) require subject-matter specific written representations – reference should be made to the particular ISA (UK) for the full text of the requirements:

• ISA (UK) 240 (Revised May 2021) The Auditor’s Responsibilities Relating to Fraud in an Audit of Financial Statements (paragraph 39);
• ISA (UK) 250 (Revised November 2019) Section A – Consideration of Laws and Regulations in an Audit of Financial Statements (paragraph 17);
• ISA (UK) 450 (Revised June 2016) Evaluation of Misstatements Identified during the Audit (paragraph 14);
• ISA (UK) 501 Audit Evidence – Specific Considerations for Selected Items (paragraph 12);
• ISA (UK) 540 (Revised December 2018) Auditing Accounting Estimates and Related Disclosures (paragraph 37);
• ISA (UK) 550 Related Parties (paragraph 26);
• ISA (UK) 560 Subsequent Events (paragraph 9);
• ISA (UK) 570 (Revised September 2019) Going Concern (paragraph 12-2(f));
• ISA (UK) 710 Comparative Information – Corresponding Figures and Comparative Financial Statements (paragraph 9); and
• ISA (UK) 720 (Revised November 2019) The Auditor’s Responsibilities Relating to Other Information (paragraph 13(c)).

In addition, paragraph A25 of ISA (UK) 500 Audit Evidence highlights that the auditor may consider it necessary to obtain written representations from management and, where appropriate, those charged with governance to confirm responses to oral enquiries.

Auditors should be reminded that written representations cannot be used as sole audit evidence in relation to any specific area of the financial statements. Written representations should be used as corroborative evidence in order to support existing audit evidence, rather than as a substitute for the auditor performing specific audit procedures to obtain sufficient appropriate audit evidence.

Accounts production

Members preparing accounts, without carrying out an audit, may also find it useful to obtain written representations from their clients. Obtaining such representations is useful to emphasise the importance placed on information provided by management in order for the member to undertake the work. In particular, where the work involves the preparation of statutory accounts and there are disclosure requirements that rely on information received from management (for example, post-balance sheet events or related party transactions), this would be appropriate.

Where a firm has prepared the accounts for a client and based those accounts on assumptions and decisions made by management then the firm may wish to confirm the treatment of particular transactions or balances in writing in a letter of representation. For example, movements in a directors’ loan account.

Tax compliance

Obtaining written representations could also be appropriate in other circumstances, for example when undertaking tax computations, where information supplied is crucial to the computation and has not been independently corroborated.

The goodwill or value of a block of clients is often based on the fees or profits they can generate. Bases usually start from the fees or profits that can be generated from the current services supplied to the clients and then apply a multiple to them to obtain the value.

Basis of the calculation

The following, non-exhaustive list, may be used as a starting point of the calculation:

• Gross recurring fees
• Future fee income
• Profitability

If multiples are used within the calculation, they will depend on a wide range of factors – there is no one ‘correct’ multiple to be used, it will be for the buyer and seller to determine. Additional considerations may however include:

• Work in progress

Due diligence

For a deal to be successful the 'fit' of the fees with the buyer will need to be established. At the outset of negotiations often all that is available is a total fee figure and details of numbers of clients in certain fee brackets with an indication of the services provided and the location of the clients. Far more detail needs to be obtained during the negotiation phase. How this information is obtained varies but at some stage the buyer would expect to see client files, accounts, fee notes etc. and where staff are involved, meet with and talk to them.

The seller will need to ensure that the fundamental principle of confidentiality as discussed in section 114 of the ICAEW Code of Ethics  is adhered to and the authority of the client would usually be required prior to disclosing client confidential information. It is normal before detailed information is disclosed that a confidentiality and non-poaching agreement is formally documented between buyer and seller. Such an agreement should also include a 'hold-harmless' clause whereby the buyer agrees not to use any information obtained against the interests of the seller.

The following are some of the matters to be considered when undertaking due diligence information gathering:

• Confirmation of information and detail
• Fee levels and charging structure
• Quality of work and files
• Profitability and overheads

A period of working together, alongside each other or in cooperation or collaboration could be agreed. The arrangements can vary considerably and will be particular to each individual’s circumstances. The arrangements should be able to be terminated without either party suffering substantial loss.

The example in Appendix 1 to this helpsheet deals specifically with those matters that are required to be confirmed by the ISAs (UK), together with other common representations obtained. It is based on the example in Appendix 2 of ISA (UK) 580.

In addition, the letter of representation should include confirmations from management on matters material to the financial statements in order to support other audit evidence obtained. In particular, where amounts are included in the accounts based on management estimates or valuations (such as property or stock values), it would be appropriate to include written confirmations.

It is not current best practice to include a long list of representations about assets and liabilities included in the accounts. Such paragraphs can detract from the impact of the more important matters, and in the case of an audit should be confirmed by adequate audit evidence.

Within the specimen letter of representation, guidance and instruction are shown in italics . None of this italicised text is for inclusion in the letter of representation. Members need to ensure it has been sufficiently tailored and all italicised text has been removed, before it is sent to client’s management for them to print on their own letterhead and sign as appropriate and then return to the firm. In some paragraphs, optional or alternative wording has been provided, shown in [square brackets] and each suggestion requires individual consideration and possible amendment.

ICAEW members, affiliates, ICAEW students and staff in eligible firms with member firm access  can discuss their specific situation with the Technical Advisory Service on +44 (0)1908 248 250 or via webchat .

• Download the sample letter of representation wording

© ICAEW 2024  All rights reserved.

ICAEW cannot accept responsibility for any person acting or refraining to act as a result of any material contained in this helpsheet. This helpsheet is designed to alert members to an important issue of general application. It is not intended to be a definitive statement covering all aspects but is a brief comment on a specific point.

ICAEW members have permission to use and reproduce this helpsheet on the following conditions:

• This permission is strictly limited to ICAEW members only who are using the helpsheet for guidance only.
• The helpsheet is to be reproduced for personal, non-commercial use only and is not for re-distribution.

For further details members are invited to telephone the Technical Advisory Service T +44 (0)1908 248250. The Technical Advisory Service comprises the technical enquiries, ethics advice, anti-money laundering and fraud helplines. For further details visit icaew.com/tas .

• Update History 01 Oct 2012 (12: 00 AM BST) First published 08 Jan 2021 (10: 40 AM GMT) Updated to reflect requirements of the revised ISAs. 05 Jan 2021 (12: 00 AM GMT) Minor edits relating to Brexit / updated regulations. Links updated. 24 Jan 2022 (01: 55 PM GMT) Changed date of latest version of ISA (May 2021). Date of specimen letter updated to match helpsheet

Read out this code to the operator.

Appendix II: Illustrative Management Representation Letter ​

The following illustrative letter includes written representations that are required by this Implementation Guide, SA 580, “Written Representations” and other Standards on Auditing as applicable. It is assumed in this illustration that the relevant accounting software meets the essential characteristics as specified by the Account Rules; and that there are no exceptions to the requested written representations. If there are exceptions, the representations would need to be modified to reflect the exceptions.

(Entity Letterhead)

(To Auditor) (Date)

This representation letter is provided in conjunction with your audit of the standalone/ consolidated financial statements of the Company for the year ended March 31, 20XX, for the purpose of reporting as to whether the accounting software used by the Company for maintaining its books of account, has a feature of recording audit trail of each and every transaction, creating an edit log of each change made in the books of account along with the date when such changes were made and ensuring that the audit trail cannot be disabled.

We confirm that to the best of our knowledge and belief, having made such inquiries as we considered necessary for the purpose of appropriately informing ourselves:

We are responsible for establishing and maintaining adequate and effective controls based on [mention control criteria] in respect of use of accounting software that entails the requisite features as specified by Account Rules.

We have performed an evaluation and made an assessment of the adequacy and effectiveness of the company's accounting software in term of recording audit trail of each and every transaction.

We have not used the procedures performed by you during the audit as part of the basis for our assessment of the effectiveness of audit trails of accounting software.

Based on the assessment carried out by us and the evaluation of the results of the assessment, we conclude that the Company uses accounting software for maintaining its books of account which has a feature of recording audit trail of each and every transaction, creating an edit log of each change made in the books of account along with the date when such changes were made and ensuring that the audit trail cannot be disabled and the audit trail been preserved by the company as per the statutory requirements for record retention except for the below mentioned exceptions noted during our assessment and evaluation.

a. (brief of deficiencies)

b. (brief of the impact)

We have disclosed to you all deficiencies identified as part of management's evaluation, including separately disclosing to you all such deficiencies that we believe to be significant deficiencies or would lead to material weaknesses in internal financial controls.

There were no instances of fraud resulting in a material misstatement to the company's financial statements and any other fraud that does not result in a material misstatement to the company's financial statements but involves senior management or management or other employees who have a significant role in the company's internal financial controls. (or) The following instances of fraud that resulted in material misstatement of financial statements in earlier years and frauds involving senior management or management or other employees who have a significant role in the company's internal financial controls were noted: (list instances and amounts involved).

The deficiencies identified in the previous engagement and communicated to the Company and those charged with governance have been remediated, except for the following: (…………) (This issue is not applicable in the first year)

There have been no communications from regulatory agencies concerning non-compliance with or deficiencies in accounting software.

We have provided you with:

All information, such as records (including SOC report) and documentation, and other matters that are relevant to your assessment of accounting software;

Additional information that you have requested from us;

Unrestricted access to those within the entity.

Audit reports of the component auditors, including their report under Section 143(3)(i) of the Act for the following subsidiary companies, jointly controlled companies and associate companies to whom reporting under Section 143(3)(i) is applicable.

There are no other subsidiary companies, jointly controlled companies and associate companies of the company to whom reporting under Section 143(3)(i) is applicable and whose auditors have not issued their report under Section 143(3)(i) of the Act.

In the case of the following subsidiary companies, jointly controlled companies and associate companies of the company to whom reporting under Section 143(3)(i) is applicable, the respective component’s year end is other than that of the Company:

With respect to these components, we have provided to you the audit reports of the component auditors, including their report under Section 143(3)(i) of the Act for their respective financial year under the Act that has been considered in the preparation of the consolidated financial statements of the Company.

There are no changes in the accounting software from March 31, 20XX [balance sheet date] till the date of this representation letter. (or) The following changes have been made to the accounting software since March 31, 20XX [balance sheet date] and the date of this letter: (list changes and reason for the change).

These changes include corrective actions taken by us with regard to significant deficiencies with respect to the following: (list significant deficiencies).

The following changes to accounting software have been proposed as on date of this representation letter but have not yet been implemented: (list proposed changes and reason for the proposed change).

The changes to the accounting software since March 31, 20XX [balance sheet date] and the proposed changes that are under consideration by the Company do not impact our assessment, evaluation and conclusion of the accounting software as at March 31, 20XX [balance sheet date]

[Any other matters that the auditor may consider appropriate.]

For and on behalf of ABC Company Limited

__ (Signature) Name and Designation

03 Apr What are Management Representation Letters?

In the world of assurance engagements, a management representation letter is a formal document that represents management’s agreement with the financial statements that are being audited or reviewed. This letter is a critical part of the assurance engagement process and is required by the auditor or reviewer as evidence that management acknowledges and accepts responsibility for the financial statements.

A management representation letter is typically issued by senior management, such as the CEO or CFO, and is addressed to the CPA firm performing the audit or review. It contains a series of statements that confirm certain facts and assurances about the company’s financial information, including the completeness and accuracy of financial records, disclosures of relevant information, and adherence to accounting principles.

The letter serves several purposes, including:

• Confirming the accuracy of financial information : The management representation letter is used to confirm that the financial statements are accurate and complete. This helps provide assurance to stakeholders that the financial statements are reliable.
• Demonstrating management’s responsibility : By signing the letter, management acknowledges its responsibility for the accuracy and completeness of the financial statements. This helps to provide accountability and transparency to stakeholders.
• Providing evidence for auditors and reviewer s: The management representation letter provides evidence to the CPA firm that management has taken responsibility for the financial statements, which helps to support the audit opinion or review conclusion.
• Reducing the risk of misstatements : The letter helps to reduce the risk of misstatements by requiring management to review the financial statements and provide assurance that they are accurate and complete.

Overall, the management representation letter is a critical part of the assurance engagement process, as it helps to provide assurance that the financial statements are accurate and complete, and that management takes responsibility for them. Without this letter, CPA firms would not have the necessary evidence to support their opinions and conclusions, which could lead to a lack of confidence in the financial statements and potential legal and financial consequences for the company. In fact, CPA firms are not permitted to complete their engagement and issue an audit or review engagement report until management provides a signed management representation letter.

If you require an audit or review and would like to speak to someone about these processes, please contact us to set up a free consultation.

Annelie Vistica

Cpa, ca – principal.

Annelie Vistica, a Principal at Clearline, is a CPA and CA with a strong background in private enterprise and assurance. With a Bachelor of Accountancy from the University of Stellenbosch in South Africa and extensive experience in tax, Annelie brings expertise in business setup, growth planning, and estate transitioning. She is passionate about engaging with clients to support them through various business stages, from inception to succession planning. Annelie values the supportive environment at Clearline, where she appreciates colleagues’ assistance in tax and assurance. Outside work, she enjoys spending time with her family and dog, exploring nature, visiting family in the Okanagan, and travelling the world.

Jennifer Scott

Cpa, cga – senior manager.

Jennifer Scott, a Senior Manager at Clearline brings a wealth of expertise in Private Enterprise and Assurance, holding designations as a CPA and CGA. Jennifer’s focus at Clearline includes conducting reviews, compilations, and providing tax services tailored to owner-manager businesses and partnerships, with a keen interest in industries such as professionals, manufacturing, real estate, and services. Her commitment to exceptional client service is evident through her proactive approach to staying updated on evolving accounting standards and tax legislation, thereby making her clients’ lives easier Jennifer’s educational background includes a Bachelor of Commerce from UBC with a major in Accounting, followed by over 15 years of experience in public practice, specializing in private enterprise. She appreciates the supportive environment at Clearline and enjoys various activities outside of work, including travelling, cheering on her children in sports like soccer, baseball, and volleyball, indulging in long walks with her dog while listening to podcasts, spending quality time with loved ones, and exploring her passion for baking through experimenting with new recipes.

Charmaine Pirrie

Cpa, ca(sa) – senior manager.

Charmaine Pirrie, a Senior Manager at Clearline is a CPA and CA (SA) with a background in audit and review engagements. With experience from Grant Thornton and D&Co, she brings expertise in private company audits and values Clearline’s supportive environment and technical resources. Charmaine also finds fulfillment in delving into her clients’ businesses to provide tailored services, ensuring meticulous audit and review procedures. Outside of work, she enjoys spending time with family, going for walks, and swimming.

Deepeka Dhillon

Cpa – manager.

Deepeka Dhillon, a Manager at Clearline, holds a CPA designation with a focus in Private Enterprise and Tax. Her primary responsibilities include compliance, corporate restructuring, and, estate and succession planning. Deepeka’s passion lies in continuous learning, enabling her to provide tailored solutions to clients’ unique needs. With a CPA designation and completion of the CPA in-depth tax program, she brings a strong educational background to her role at Clearline. Deepeka values the countless opportunities at Clearline to expand her knowledge in the complex world of tax. Outside work, she enjoys spending time with her beloved Jack Russell Terrier, Opie.

Raj Momrath

Cpa, ca, senior tax manager.

Raj Momrath, a Senior Tax Manager at Clearline, is a CPA, CA specializing in Canadian Tax. With a focus on Canadian tax planning, corporate reorganizations, estate planning, and providing business advice, Raj caters to a diverse clientele, including small owner-manager companies, high-net-worth individuals and large privately held multinational firms. His passion lies in helping Canadian owner-manager businesses and their shareholders minimize their overall tax obligations while navigating disputes with the Canada Revenue Agency and ensuring compliance with the complex Canadian tax system. Raj’s professional journey includes prior experience in PwC’s tax group, where he obtained his Chartered Accountant designation and then some time at some mid-sized firms. Raj completed the CPA Canada InDepth Tax course in 2017 strengthening his knowledge of Canadian tax. At Clearline, Raj appreciates working alongside knowledgeable colleagues and enjoys spending quality time with his wife and two sons and attending and volunteering with their sports activities. In his leisure time, Raj indulges in barbequing, golfing, and spending time outdoors, finding relaxation and enjoyment in these pursuits.

Julia Wallis

Julia Wallis, a Senior Manager at Clearline, holds designations as a CPA, CGA, and also holds a BA. Working within the Private Enterprise Group, her primary focus revolves around assisting entrepreneurs in understanding their personal and business finances while ensuring compliance with tax reporting requirements. Julia finds fulfillment in learning about her clients’ businesses and providing financial insights to enhance their management effectiveness while optimizing tax strategies. With a diverse career spanning various companies and public practice roles, including as a controller, Julia’s progression has equipped her with invaluable skills and insights into different business operations. She chose Clearline for its respected partners and staff, aligned philosophy on client service, and flexibility to balance demanding tax filing periods with leisure time for travel and personal interests such as gardening, wine exploration, reading, and relaxation.

Bilal Kathrada

Cpa, ca, principal.

Bilal, a Principal at Clearline Chartered Professional Accountants, primarily focuses on income tax and succession planning for Canadian owner-managed businesses in various industries. Bilal received his Bachelor of Commerce degree from the University of Victoria and obtained his CA designation in 2005.

Prior to Clearline, he worked in the tax group of a large international accounting firm in Vancouver and a mid-sized accounting firm located in the Fraser Valley.

Outside of the office, he enjoys spending time with his wife and three children. He enjoys outdoor activities such as golf and spending time with his family and friends.

Danny Sandhu

Cpa, manager.

Bio coming soon.

Shehzel Saif

Cpa, tax manager.

As Clearline’s Tax Manager, Shehzel focuses on tax planning, corporate reorganizations and succession and estate planning. She’s passionate about continuous learning and staying up to date on tax legislation changes and helping clients with succession. In addition to her CPA designation, Shehzel also has a Bachelor of Business Administration and has completed the CPA In-Depth Taxation Program. Outside of work, she enjoys spending time with family and friends, traveling and trying out new recipes.

Ameeta Randhawa

As Clearline’s HR Manager, Ameeta supports our firm’s greatest resource—our staff. With a Bachelor of Business Administration in Human Resources and over 7 years of HR experience in various industries, she ensures all employees have a positive experience at Clearline. Ameeta’s focuses include recruitment, performance management, employee relations, program and policy development, and employee engagement. Outside of work, she enjoys traveling and spending time with friends and family.

CPA, CA, Senior Manager

Michael is a Senior Manager in Private Enterprise, carrying out reviews, compilations, and tax services for small- to medium-sized businesses. With a Bachelor of Commerce specializing in finance and a Diploma in Accounting, backed by over a decade of accounting experience, Michael is a trusted advisor who helps clients’ businesses succeed. Outside of the office, Michael enjoys spending time with family, trying out different restaurants in the city, and building and collecting mechanical keyboards.

CPA, CGA, Manager

Victor K. Yoshida

Victor was born and raised in Vancouver and obtained his Bachelor of Commerce from the University of British Columbia. He articled with Deloitte & Touche and received his CA designation in 1984. Victor was accepted to the firm’s tax group and went on to complete the Canadian Institute of Chartered Accountants In-Depth Tax course.

Victor specializes in Canadian income tax issues for professional and owner-managed businesses. He has extensive experience with business succession, estate planning, wealth preservation issues, corporate reorganizations, as well as mergers and acquisitions.

Victor was a member of the education committee of the Institute of Chartered Accountants of British Columbia and has held executive positions with various amateur sport organizations.

In his free time, Victor enjoys training for marathons, travelling, and spending time with his family.

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A management representation letter is a structure letter composed by an organization’s outer reviewers, which is marked by a senior organization the board. The letter verifies the precision of the financial reports that the organization has submitted to the examiners for their investigation. For samples of different letters, check out our collection of more representation letter templates on our official website template.net that you can use. You may also see more different types of representation   letters in Word from our official website template.net.

• Generally, the letter expresses that the entirety of the data submitted is precise and that all material data has been uncovered to the reviewers. The evaluators utilize this letter as a feature of their review proof. View a wider selection of Creative Letter   Templates right here.
• The letter likewise moves some fault to the board, on the off chance that things being what they are, a few components of the examined fiscal summaries don’t reasonably speak to the money related outcomes, monetary position, or incomes of the business.
• Consequently, the explanations that the reviewer remembers for the letter are very expansive extending, enveloping each conceivable zone in which the board’s failings could prompt the issuance of off base or deceiving budget summaries. Looking for more insights? Dive into our blog post about representative cover letter templates.
• The executives are answerable for the best possible introduction of the budget summaries as per the pertinent bookkeeping system. Find more Letter Format Templates by visiting this link.
• Every single money related record have been made accessible to the examiners
• All governing body minutes are finished
• The board has made accessible all letters from administrative organizations concerning monetary revealing resistance
• There are no unrecorded exchanges
• The net impact of every uncorrected misquote is insignificant
• The supervisory crew recognizes its duty regarding the arrangement of budgetary controls. You can also find a wider variety of management representation letters in Pdf format on our official website at template.net.
• All related gathering exchanges have been revealed; Explore a variety of Professional Letter Templates here.
• Every unforeseen risk have been revealed;
• All unasserted cases or evaluations have been revealed;
• The organization has revealed all liens and different encumbrances on its advantages;
• Every material exchange have been appropriately recorded;
• The board is liable for frameworks intended to distinguish and forestall extortion;
• The board has no information on misrepresentation inside the organization;
• The budget reports comply with the relevant bookkeeping system.
• Evaluators regularly don’t enable the administration to roll out any improvements to the substance of this letter before marking it, since this would successfully lessen the risk of the executives. Check out more Personal Letter Templates available here.
• An inspector regularly won’t give a supposition on an organization’s fiscal summaries without first getting a marked administration portrayal letter.
• An administration portrayal letter is a particular letter composed by an organization’s outer reviewers and afterward marked by the senior organization the executives. The date of the archive can’t be later than the date at which the review wraps up. The letter confirms that the data gave is precise and revealed to the examiners.
• On the off chance that for reasons unknown it’s discovered that a few components of the evaluated budget summaries are not exact then evaluators should lead further examinations. As you can envision, to state there’s a ton of strain to hit the nail on the head the first run-through is putting it mildly. You can also discover a greater variety of management representation  letters in Pages on our official website, template.net.
• All dangers, vulnerabilities, liens, encumbrances, unrecorded and recorded exchanges, legitimate infringement, unexpected liabilities, and unasserted cases or evaluations have been sufficiently recorded and uncovered.
• Every money related record has been made accessible to the evaluators. You may also see more on Business Letter templates here.
• All board and investor meeting minutes have been made accessible to the examiner.
• The executives are liable for frameworks intended to recognize and forestall extortion and have no information on misrepresentation inside the organization.
• The executives don’t expect to have changes that will affect the estimation of organization resources or liabilities.
• The board is answerable for the correct introduction of the fiscal reports by the relevant bookkeeping structure and the group recognizes its duty regarding the arrangement of money related controls.
• The board has made accessible all letters from administrative offices concerning money related detailing rebelliousness. For the best experience, explore a wider range of management representation  letters in Google Docs directly from our official website, template.net.

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• Union Budget 2024
• CA, CS, CMA

Format of Management Representation Letter (MRL) for Audit

In this article author has shared the format of the Management Representation Letter or Written Representation (MRL/WR)  to be obtained from the management during various professional engagements:

M/s XYZ & Co.

Gurgaon, Haryana

Sub: Management Representation in course of Statutory Audit for F.Y. 2021-22 .

This representation letter is provided in connection with your audit of the financial statements of M/s Private Limited, Delhi for the year ended March 31, 20XX  for the purpose of expressing an opinion as to whether the financial statements are presented fairly, in all material respects, (or give a true and fair view) in accordance with the applicable accounting standards in India.

We confirm that (to the best of our knowledge and belief, having made such inquiries as we considered necessary for the purpose of appropriately informing ourselves):

Financial Statements

• We have fulfilled our responsibilities, as set out in the terms of the audit engagement, for the preparation of the financial statements in accordance with Financial Reporting Standards; in particular the financial statements are fairly presented (or give a true and fair view) in accordance with the applicable accounting standards in India.
• Significant assumptions used by us in making accounting estimates, including those measured at fair value, are reasonable.
• Related party relationships and transactions have been appropriately accounted for and disclosed in accordance with the requirements of applicable accounting standards in India.
• All events subsequent to the date of the financial statements and for which applicable accounting standards in India require adjustment or disclosure have been adjusted or disclosed.
• The effects of uncorrected misstatements are immaterial, both individually and in the aggregate, to the financial statements as a whole.

Information Provided

• We have provided you with:

Access to all information of which we are aware that is relevant to the preparation of the financial statements such as records, documentation and other matters;

Additional information that you have requested from us for the purpose of the audit; and

Unrestricted access to persons within the entity from whom you determined it necessary to obtain audit evidence.

• All transactions have been recorded in the accounting records and are reflected in the financial statements.
• We have disclosed to you the results of our assessment of the risk that the financial statements may be materially misstated as a result of fraud.
• We have disclosed to you all information in relation to fraud or suspected fraud that we are aware of and that affects the entity and involves:

Management;

Employees who have significant roles in internal control; or

Others where the fraud could have a material effect on the financial statements.

• We have disclosed to you all information in relation to allegations of fraud, or suspected fraud, affecting the entity’s financial statements communicated by employees, former employees, analysts, regulators or others.
• We have disclosed to you all known instances of non-compliance or suspected non-compliance with laws and regulations whose effects should be considered when preparing financial statements.
• We have disclosed to you the identity of the entity’s related parties and all the related party relationships and transactions of which we are aware.

For and on Behalf Board of Directors

For any inquiry you may write us on:  [email protected]

Disclaimer:  The information provided by the author in the article is for general informational purposes only. All information provided is in the good faith, however we make no representation or warranty of any kind, express or implied, regarding the accuracy, adequacy, validity, reliability, availability or completeness of any information in the article.

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Name: CA. Ramanujan Sharma

Qualification: ca in practice, company: n k r s & co (chartered accountants), location: gurugram, haryana, india, member since: 25 apr 2022 | total posts: 17, my published posts, join taxguru’s network for latest updates on income tax, gst, company law, corporate laws and other related subjects..

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