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ISA Implementation Support Module
Prepared by IAASB Staff
October 2010
Written Representations
• Introduction
• Significant Features of New Standard
– Basis for Requiring Written Representations
– Written Representations as Audit Evidence
– Source of Written Representations
– Management’s Responsibilities
– Specific Written Representations
– Dating of Written Representations
Overview
2
• The context for revising ISA 580
– Firms’ practices around the world regarding written representations had become inconsistent
– Evidence of excessive or undue reliance on written representations from quality control inspections
– Question of where primary responsibility for the financial statements lies as a result of a spate of major corporate scandals
Introduction
3
Basis for Requiring Written Representations
4
When other audit evidence cannot reasonably be
expected to exist
Old ISA 580 New ISA 580
To support other audit evidence
• Written representations are audit evidence
– They are necessary information used to arrive at audit conclusions
• However, on their own they cannot be relied upon for audit evidence to support audit conclusions
• A written representation defined as a written statement that management provides to the auditor to confirm certain matters or to support other audit evidence
– Not to be confused with an external confirmation
Written Representations as Audit Evidence
5
Source of Written Representations
6
Ordinarily management with primary responsibility for the
entity and its financial aspects
Old ISA 580 New ISA 580
Only from management who has responsibility for:
(1)Preparing and presenting financial statements; and(2)Is knowledgeable about the relevant matters
Management’s Responsibilities
7
Audit evidence that management acknowledges its responsibility for fair presentation of f/s
Old ISA 580
New ISA 580
Written representations that management has: (1)Fulfilled its responsibility for preparation and, where relevant, fair presentation of f/s; and(2)Provided auditor with all relevant information and access
ISA 210
• Two further requirements
– Written representations that all transactions have been recorded and are reflected in the financial statements − to support audit evidence regarding completeness
– Description of management’s responsibilities in written representations to be consistent with description of those responsibilities in agreed terms of engagement
• No requirement for written representation regarding fulfillment of management’s responsibility regarding internal control
Management’s Responsibilities
8
• Audit evidence about completeness cannot be obtained when:
– Management fails or refuses to provide the written representations regarding fulfillment of its responsibilities
– There is sufficient doubt about management’s integrity such that the written representations are not reliable
• Judgment about whether management has fulfilled its responsibilities cannot be formed on basis of other audit evidence in these circumstances
• Disclaimer of opinion required in such a case
Management’s Responsibilities
9
Specific Written Representations
10
ISA 580: Overarching basic principles on written representations
Specific written representations required
by other ISAs
Specific written representations auditor believes are necessary
To support other audit evidence
regarding specific aspects of f/s
To support other audit evidence
regarding specific assertions
• Date written representations as near as practicable to, but not after, date of audit report
– Written representations are necessary audit evidence without which audit opinion cannot be expressed
• Written representations should cover all financial statements and period(s) referred to in audit report
– Important for management to reaffirm that written representations for prior periods are still appropriate
– Requirement applies even if current management were not present during all periods referred in audit report
Dating of Written Representations
11
Note
This set of support slides does not amend or override the ISAs, the texts of which alone are authoritative. Reading the slides is not a substitute for reading the ISAs. The slides are not meant to be exhaustive and reference to the ISAs themselves should always be made. In conducting an audit in accordance with ISAs, the auditor is required to comply with all the ISAs that are relevant to the engagement.
12
Copyright © October 2010 by the International Federation of Accountants (IFAC). All rights reserved. Permission is granted to make copies of this work provided that such copies are for use in academic classrooms or for personal use and are not sold or disseminated and provided that each copy bears the following credit line: “Copyright © October 2010 by the International Federation of Accountants (IFAC). All rights reserved. Used with permission of IFAC. Contact [email protected] for permission to reproduce, store, or transmit this work.” Otherwise, written permission from IFAC is required to reproduce, store, or transmit, or to make other similar uses of, this work, except as permitted by law. Contact [email protected].
International Federationof Accountants
ISBN: 978-1-60815-073-1
www.ifac.org