What are Written Representations?

Written representations are statements made by client management, confirming certain topics or supporting audit evidence. These representations are needed by the auditor as supporting evidence in an audit engagement, since management acknowledges its responsibilities in certain areas and attests to various issues. These representations are considered to be supporting evidence, so they are intended to confirm other audit evidence; that is, the auditor should not rely solely on written representations.

The auditor assembles the formal list of representations and forwards it to the client to be signed, either by management or those charged with governance of the client.

Types of Written Representations

Management should provide written representations to the auditor concerning the following issues:

Completeness. That it has provided the auditor with all relevant information and access to information, and that all transactions have been properly recorded in the accounting system.
Estimates. That it believes all significant assumptions made when making accounting estimates are reasonable. These representations may include the following topics:
- The appropriateness of the measurement processes used to determine accounting estimates.
- Whether any subsequent events have occurred that would require adjustments to the estimates.
- Whether the assumptions used reflect management’s intent.
- Whether the related disclosures are complete and appropriate.
Fraud. That it is responsible for the design, implementation, and maintenance of internal controls to prevent and detect fraud, has disclosed the results of its risk assessment that the financial statements could be materially misstated because of fraud, and has disclosed its knowledge of any fraud that involves its management or other employees or knowledge of allegations relating to such fraud.
Inquiries with outside parties. That it has made inquiries with actuaries, staff engineers working on environmental liability issues, legal counsel, and others concerning matters that require specialized knowledge.
Laws and regulations. That it has disclosed all instances of noncompliance with laws and regulations whose effects should be considered when preparing financial statements.
Litigation and claims. That all litigation and claims whose effects should be considered by management when preparing the financial statements have been disclosed and accounted for.
Preparation and presentation of financial statements. That it has fulfilled its responsibility for the preparation and fair presentation of the financial statements, as well as for the design, implementation, and maintenance of a system of internal controls.
Related party transactions. That it has disclosed all related parties, as well as the transactions related to them. A further disclosure to consider adding is whether there are any related party transactions involving undisclosed side agreements.
Subsequent events. That all events occurring subsequent to the date of the financial statements have been accounted for or disclosed.
Uncorrected misstatements. That it believes the effects of uncorrected misstatements are immaterial to the financial statements.