Exposure Drafts, Comment Letters, and Statements of Position
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Description
The Auditing Standards Board (ASB) has issued this exposure draft to provide appropriate guidance regarding written management representations to be obtained by an auditor as part of an audit performed in accordance with generally accepted auditing standards. A task force of the ASB reviewed Statement on Auditing Standards (SAS) No. 19, Client Representations (AICPA, Professional Standards, AU sec. 333), and determined that it needed to be updated to reflect changes in auditing practice and the auditing environment since SAS No. 19 was issued. This proposed Statement would supersede SAS No. 19. This proposed Statement: 1. Clarifies the requirement for an auditor to obtain written representations for all financial statements and periods covered by the auditor's report. 2. Includes a representation made by management that states that it is management's belief that the financial statements are fairly presented in conformity with generally accepted accounting principles. 3. Includes a list of updated specific representations to be obtained from management that are consistent with representations obtained in current practice. Such representations include information concerning fraud as referred to in SAS No. 82, Consideration of Fraud in a Financial Statement Audit (AICPA, Professional Standards, vol. 1, AU sec. 316) and significant estimates and material concentrations known to management that are required to be disclosed in accordance with the AlCPA's Statement of Position 94-6, Disclosure of Certain Significant Risks and Uncertainties. 4. States that the auditor ordinarily should obtain a representation letter tailored to cover representations relating to the financial statements unique to the entity's business or industry. Also, appendix B, "Additional Representations," has been added to the proposed Statement and includes additional representations that may be appropriate in certain situations. 5. Requires the auditor to investigate the circumstances and consider the reliability of a representation made, if that representation is contradicted by other audit evidence. 6. Includes guidance regarding materiality levels that may be stated explicitly in the representation letter, in either qualitative or quantitative terms. Also, the illustrative management representation letter included in appendix A, "Illustrative Management Representation Letter," includes a aulatiative discussion of materiality. 7. Includes guidance for circumstances when an auditor should obtain an updated representation letter from management such as when a predecessor auditor is requested by a former client to reissue his or her report on the financial statements of a prior period. Also, an illustrative updating management representation letter has been added to the proposed Statement in appendix C, "Illustrative Updating Management Representation Letter." This exposure draft contains a proposed revision to SAS No. 58, Reports on Audited Financial Statements (AICPA, Professional Standards, vol 1, AU sec. 508.71), which would expand a predecessor auditor's procedures when asked by a former client to reissue his or her report on the financial statements of a prior period. This proposed amendment would require the predecessor auditor to obtain a letter of representation from management, in addition to the representation letter from the successor auditor, before reissuing a report previously issued on financial statements of a prior period. See the section herein entitled, "Proposed Amendment to Statement on Auditing Standards No. 58, Reports on Audited Financial Statements." In conjunction with the proposed amendment to SAS No. 58, an illustrative updating management representation letter is included as appendix C, "Illustrative Updating Management Representation Letter," of the proposed Statement. This proposed Statement would supersede SAS No. 19 and Auditing Interpretation No. 2, "Management Representations When Current Management Was Not Present During the Period Under Audit" (AICPA, Professional Standards, vol. 1, AU sec. 9333). It also would amend SAS No. 58.
Publication Date
1997
Relational Format
Book
Keywords
Audited financial statements -- Standards -- United States; Attest function (Auditing) -- Standards -- United States
Disciplines
Accounting | Taxation
Recommended Citation
American Institute of Certified Public Accountants. Auditing Standards Board, "Proposed Statement on auditing standards : Management representations (to supersede Statement on auditing standards no. 19, Client representations, and Auditing interpretation no. 2 "Management representations when current management was not present during the period under audit") and an amendment to Statement on auditing standards no. 58, Reports on audited financial statements;Management representations (to supersede Statement on auditing standards no. 19, Client representations, and Auditing interpretation no. 2 "Management representations when current management was not present during the period under audit") and an amendment to Statement on auditing standards no. 58, Reports on audited financial statements; Exposure draft (American Institute of Certified Public Accountants), 1997, June 9" (1997). Exposure Drafts, Comment Letters, and Statements of Position. 630.
https://egrove.olemiss.edu/aicpa_sop/630
Comments
Originally published by: American Institute of Certified Public Accountants; Copyright and permission to reprint held by: American Institute of Certified Public Accountants.