AUDITORS DUTIES AS REGARDS MANAGEMENT REPRESENTATIONS
(a) The auditor should corroborate the management representations with other sources.
b) Evaluate reasonableness of management representations in the light of other evidences. If the auditor finds a contradiction, the causes should be investigated, and reliability of other representations should be considered.
(c) Ensure that letter of representation is signed by person whose level of authority is appropriate to the matters contained in letter of representation, for example, by the chief executive and finance director.
(d) Even if the letter of representation is received, the auditor will still have to decide whether in the circumstances are sufficient to enable him to issue an unqualified opinion.
(e) Where other sufficient appropriate evidence is expected to exist, and the auditor is unable to obtain such evidence, a mere receipt of letter of representation would not justify issuance of an unqualified report.
f) The letter of representation should be obtained every year and filed in current year audit file.
As the representation letter forms an audit evidence, it should be approved before the audit report is prepared. In case of unusual time lag between receipt of representation letter and issuance of audit report, the auditor may need to perform other audit work or obtain a supplementary letter of representation. The date of representation letter should normally be the same as the date of audit report and approval of financial statements by the directors.
REFUSAL BY MANASEMENT TO ISSUE REPRESENTION
Management should normally not refuse to issue representation letter as in the engagement letter, the management would have already agreed to issue such letter.
However, if the management refuses to issue representation letter, the auditor should persuade management advising that it is a normal audit procedure.
Alternatively, the auditor should prepare certain statements setting out his understanding of the” major representation made and request the management to confirm those statements.
If management is not prepared to sign any statements, the auditor will have to issue a qualified opinion or disclaimer of opinion.