What is the main purpose of a letter of representation?
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A. Serve as an introduction to company personnel and an authorization to examine the records B. Discharge the auditor from legal liability for the audit C. Confirm in writing management s approval of limitations on the scope of the audit D. Confirm in writing management s approval of limitations on the scope of the audit E. Remind management of its primary repsonsibility for financial statements
The answer is letter E. Reminds the management of its primary responsibility for financial statements. A management representation is prepared by the management to confirm that the data provided is true, and they can be held liable for the information provided. It also serves as audit evidence.
E. Remind management of its primary responsibility for financial statements
The letter is given by outside editors who checkand cross-checkthe company's financial statements and approvethem as accurate and correct. The letter must be signed by the CEO or the CFO of the company. The auditors use also this as part of the audit evidence. It shifts blame towards the management if errors are discovered in the financial dealings.
A letter of representation is also known as a management representation letter. The answer to this is letter A. This will serve as an introduction to company personnel and authorization to examine the records. This is usually signed after the fieldwork and the checking is already completed. The letter is a representation that all of the details that are written in the letter are authentic.
This means that the records and other data are not falsified and have been checked before submission. This is also given as a support for the data completed by the auditing team. Take note that there are still other letters that are needed in the financial side of the business.
The letter of representation is something that is normally created by the external auditors of the company. The answer to this question is letter e. The letter of representation is meant to remind the management of its primary responsibility for creating financial statements. This will support the data that has been sent previously by the company.
This is usually provided by an outside editor who has also checked the information stated by the company before it would be submitted. This can be a problem when the accuracy and the relevance of the data that will be written there will prove to be wrong and not helpful for the financial statement of the company.