80.) Which of the following statements ordinarily is not included among the written clientrepresentations made by the chief executive officer and the chief financial officer?a.) “Sufficientevidence has been made available to the auditor to permit the expression of an unmodifiedopinion.”81.) To which of the following matters would materiality limits not apply when obtaining writtenclient representations?d.) Instances of fraud involving management.82.) Which of the following matters most likely would be included in a management representationletter?c.) A confirmation that the entity has complied with contractual agreements.83.) Krim, president and CEO of United Co., engaged Smith, CPA, to audit United’s financialstatements so that United could secure a loan from First Bank. Smith expressed an unmodifiedopinion on May 20, but the loan was delayed. On August 5, on inquiry to Smith by First Bank,Smith, relying on Krim’s written representation, made assurances that United’s financial status hadnot changed materially. Krim’s representation was untrue because of a material change after May20. First relied on Smith’s assurances of no change. Shortly afterward, United became insolvent. IfFirst sues Smith for negligent misrepresentation, Smith will likely be foundb.) Liable, becauseSmith should have obtained sufficient appropriate audit evidence to verify the status of United.84.) Which of the following management roles would typically be acknowledged in a managementrepresentation letter?a.) Management has the responsibility for the design of controls to detectfraud.85.) Of which of the following matters is a management representation letter required to containspecific representations?b.) Information concerning fraud by the CFO.86.) Which of the following statements is correct regarding a management representation letter? Show
Get answer to your question and much more Which of the following statements ordinarily is not included among the written client representations made by the chief executive officer and the chief financial officer? "Sufficient
audit evidence has been made available to the auditor to permit the issuance of an unmodified opinion." This answer is correct, that is, not included, because while the chief executive officer and the chief financial officers must make information available to the auditor, they do not make a judgment on whether evidence is sufficient. Because of the pervasive effects of laws and regulations on the
financial statements of governmental units, an auditor should obtain written management representations acknowledging that management has Identified and disclosed all laws and regulations that have a direct and material effect on its financial statements. This answer is correct because the professional standards state that the auditor should consider obtaining representations from management that it has identified
and disclosed to the auditor all laws and regulations that have a direct and material effect on the determination of financial statement amounts. The section also suggests obtaining a representation that management is responsible for the entity’s compliance with laws and regulations applicable to it. Which of the following statements ordinarily is included among the written client representations obtained by
the auditor? Compensating balances and other arrangements involving restrictions on cash balances have been disclosed. The date of the management representation letter should coincide with the date of the Balance sheet. Auditor's report. The requirement is to determine the proper date for a client's representation letter. AU-C 580 states that the representation letter should be dated as of the date of the auditor's report. A purpose of a management representation letter is to reduce The
possibility of a misunderstanding concerning management's responsibility for the financial statements. The requirement is to identify a purpose of a management representation letter. Answer (c) is correct because a management representation letter is meant to reduce the possibility of a misunderstanding concerning management's responsibility for the financial statements. Answer (a) is incorrect because reducing audit risk to an aggregate level of misstatement that could be considered
material is not a logically sound statement. Answer (b) is incorrect because the management representation letter does not modify an auditor's responsibility to detect material misstatements. Answer (d) is incorrect because management representation letters are not a substitute for other procedures. For which of the following matters should an auditor obtain written management representations? Management's compliance with
contractual agreements that may affect the financial statements. The requirement is to identify the matter on which an auditor should obtain written management representations. Answer (c) is correct because written representations are ordinarily obtained on noncompliance with aspects of contractual agreements that may affect the financial statements. Answer (a) is incorrect because auditors do not ordinarily obtain a cost-benefit justification from management related to internal control
weaknesses. Answer (b) is incorrect because written representations are not ordinarily obtained on such future plans. Answer (d) is incorrect because management may or may not be responsible for employee violations of laws, and because such a representation is not ordinarily obtained. See AU-C 580 for information on client representations. Of which of the following matters is a management representation letter
required to contain specific representations? Information concerning fraud by the CFO. This is correct because auditors must obtain a representation that those signing the letter have no knowledge of fraud or suspected fraud committed by (1) management, (2) employees who have significant roles in internal control, or (3) others where the fraud could have a material effect on the financial statements. "There have been no communications from regulatory agencies concerning noncompliance with, or deficiencies in, financial reporting practices
that could have a material effect on the financial statements." The foregoing passage is most likely from a Management representation letter. This answer is correct because the professional standards require that the auditor obtain such a statement in the management representation letter. Which of the following statements ordinarily is included among the written client representations obtained by the auditor? Compensating balances and other arrangements involving restrictions on cash balances have been disclosed. The requirement is to identify the information ordinarily included among the written client representations obtained by the auditor. Answer (a) is correct because AU-C 580 includes information on compensating balances in the list of representations normally obtained. Answer (b) is incorrect because management need not acknowledge a responsibility for employee illegal actions. Answer (c) is incorrect because the auditor, not the client, determines whether sufficient audit evidence has been made available. Answer (d) is incorrect because, for purposes of a financial statement audit, management need not attempt to determine whether material weaknesses in internal control exist. Which of the following auditing procedures is ordinarily performed last? Obtaining a management representation letter. This answer is correct because a management representation letter should be received and dated as of the last day of fieldwork (the date of the auditor’s report). Hall accepted an engagement to audit the year 1 financial statements of XYZ Company. XYZ completed the preparation of the year 1 financial statements on February 13, year 2, and Hall began the audit
work on February 17, year 2. Hall completed gathering sufficient appropriate evidence on the audit work on March 24, year 2, and and released the audit report on March 28, year 2. The client’s representation letter normally would be dated March 24, year 2. March 24, year 2. This answer is correct because the management representation letter should be dated no earlier than the date of the auditor's report and is normally the same date as the auditor's report. The auditor's report is dated when sufficient appropriate audit evidence has been obtained, March 24, year 2, in this case. An auditor should obtain written representations from management concerning litigation claims and assessments.
These representations may be limited to matters that are considered either individually or collectively material, provided an understanding on the limits of materiality for this purpose has been reached by Management and the auditor. This answer is correct because materiality must be determined by management and the auditor. The client’s lawyer only becomes involved when an inquiry has been directed to him/her. Because of the pervasive effects of laws and regulations on the financial statements of governmental units, an auditor should obtain written management representations acknowledging that management
has Identified and disclosed all laws and regulations that have a direct and material effect on its financial statements. This answer is correct because, in addition to normal representations, auditors should consider obtaining additional representations from management acknowledging that (1) management is responsible for the entity’s compliance with laws and regulations and (2) management has identified and disclosed to the auditor all laws and regulations that have a direct and material effect on the financial statements. Which of the following matters would an auditor most likely include in a management representation letter? The completeness and availability of minutes of stockholders' and directors' meetings. The requirement is to identify the matter that an auditor most likely would include in a management representa-tion letter. Auditors will generally request assurance as to the completeness and availability of minutes of stockholders' and directors' meetings. See AU-C 580 for written representations ordinarily obtained by the auditor. Which of the following management roles would typically be acknowledged in a management representation letter? Management has the responsibility for the design of controls to detect fraud. This answer is correct because the professional standards indicate that auditors should obtain representations on management’s acknowledgement of its responsibility for the design and implementation of programs and controls to prevent and detect fraud. If management refuses to furnish certain written representations that the auditor believes are essential, which of the following is appropriate? This may have an effect on the auditor’s ability to rely on other representations of management. This answer is correct because management’s refusal to furnish such written representations constitutes a scope limitation which is sufficient to preclude an unmodified opinion. In addition, the auditor should consider whether s/he can rely on other representations of management. The date of the management representation letter should coincide with the Date of the auditor’s report. This answer is correct because the representation letter should be dated as of the date of the auditor’s report. In obtaining written representations from management, materiality limits ordinarily would apply to representations related to Amounts concerning related-party transactions. This answer is correct because related-party transactions are so limited by the professional standards. That standard’s approach is that, unless stated otherwise, representations may be limited to those that are considered material to the financial statements. Which of the following expressions most likely would be included in a management representation
letter? No events have occurred subsequent to the balance sheet date that require adjustment to, or disclosure in, the financial statements. This answer is correct because the auditors obtain management’s assurance in the representation letter that no significant events occurred subsequent to the balance sheet date that would require adjustment and/or disclosure. Which of the following matters most likely would be included in a management representation letter? A confirmation that the entity has complied with contractual agreements. This answer is correct because management representation letters ordinarily include confirmation that the entity has complied with contractual agreements. A written
representation from a client’s management which, among other matters, acknowledges responsibility for the fair presentation of financial statements, should normally be signed by the Chief executive officer and the chief financial officer. This answer is correct because ordinarily the chief executive officer and the chief financial officers should sign the letter of representations. These are the individuals who the auditor believes are responsible for and knowledgeable about the matters covered by the representations. To which of the following matters would an auditor not apply materiality limits when obtaining specific written client representations? Fraud involving employees with significant roles related to internal control. This answer is correct because the professional standards require that a materiality limit not apply to fraud involving management or employees who have significant roles in internal control. An auditor is reporting on comparative financial statements for three years. Which of the following statements is correct regarding written representations from management? The representation letter needs to address all of the years being covered in the report. Correct! As stated in AICPA Professional Standards (AU-C 580.20) “The written representations should be for all financial statements and period(s) referred to in the auditor's report. Which of the following statements would an auditor most likely require management to indicate in a written representation letter obtained for an audit? Management acknowledges its responsibilities for the design and implementation of programs and controls to detect fraud. Correct! A management representation letter routinely requires management to take responsibility for the design, implementation, and maintenance of programs and controls to detect fraud. Management's responses to inquiries can be corroborated by each of the following, except Preparation of the summary of unadjusted differences. Correct! The purpose of the “summary of unadjusted differences” is to determine whether identified differences between the accounting records and the audit evidence that are not individually material might be material in the aggregate. These items represent differences already identified and are not applicable to supporting management's responses to the auditor's inquiries. Which of the following management roles would typically be acknowledged in a management representation letter? Management has the responsibility for the design of controls to detect fraud. This is a required item in the management representation letter. Management must acknowledge its responsibility for the design and implementation of programs and controls to prevent and detect fraud. Of which of the following matters is a management representation letter required to contain specific representations? Information concerning fraud by the CFO. A management representation letter routinely includes a statement pointing out that senior management has no knowledge of any fraud or suspected fraud involving management, which includes the CFO. To which of the following matters would an auditor not apply
materiality limits when obtaining specific written representations from management? Fraud involving employees with significant roles in the internal control structure. Because of the possible effects of fraud on other areas of the audit, materiality limits would not apply to the reporting of fraud involving employees with significant roles in internal control in the written management representations. One purpose of a
management representation letter is to reduce The possibility of a misunderstanding concerning management's responsibility for the financial statements. A management representation letter is obtained by the auditor to reduce the possibility of a misunderstanding concerning management's responsibility for the financial statements and to document the representations made by management during the course of the audit. Which of the following statements would most likely be included among the written client representations obtained by the auditor? Compensating balances and other arrangements involving restrictions on cash balances have been disclosed. The management representations letter would appropriately include statements about the disclosure of compensating balances and other arrangements involving restrictions on cash balances. We have disclosed to you all known instances of noncompliance or suspected noncompliance with laws and regulations whose effects should be considered when preparing financial statements." The foregoing passage most likely is from a(n) Management representations letter. The management representation letter commonly includes a statement as to violations or possible violations of laws or regulations whose effects should be considered for disclosure in the financial statements or as a basis for recording a loss contingency. The date of the management representation letter should coincide with the date of the Auditor's report. The auditor is concerned with events occurring through the date of the report that might impact the financial statements. Therefore, the management representation letter should be dated with the date of the auditor's report. Which of the following matters would an auditor most likely include in a management representations letter? The completeness and availability of minutes of stockholders' and directors' meetings. The management representations letter typically includes a comment along the following lines: "We have provided you with access to all information, of which we are aware that is relevant to the preparation and fair presentation of the financial statements such as records, documentation and other matters, and additional information that you have requested from us for the purpose of the audit." The foregoing passage encompasses the completeness and availability of all minutes of any meetings of stockholders and the board of directors. Key Co. plans to present comparative financial statements for the years ended December 31, 2005, and 2006, respectively. Smith, CPA, audited Key's financial statements for both years and plans to report on the comparative financial statements on May 1, 2007. Key's current management team was not present until January 1, 2006. What period of time should be covered by Key's management representation letter? January 1, 2005, through May 1, 2007. The management representation letter should address all periods covered by the auditor's report. Key's management representation letter, therefore, should cover the two periods being audited up through the date of the report, i.e., from January 1, 2005, through May 1, 2007. This requirement exists even if management was not present during all periods covered by the auditor's report. Which of the following should be included in a management representation letter?Contents of a Management Representation Letter
All financial records have been made available to the auditors. All board of directors minutes are complete. Management has made available all letters from regulatory agencies regarding financial reporting noncompliance. There are no unrecorded transactions.
Which of the following matters is most likely to be included in a management representation letter?Which of the following matters will an auditor most likely include in a management representation letter? Management's acknowledgment of its responsibility to detect employee fraud.
Which of the following matters most likely would be included in a management representation letter for an integrated audit?Which of the following matters most likely would be included in a management representation letter for an integrated audit? . The completeness and availability of minutes of stockholders' and directors' meetings.
Which of the following is an example of a representation letter?Example of a Representation Letter. Ladies and Gentlemen, This letter is written to you in connection with the prospectus dated XXXXXXX 20XX, filed by [Company Name].
|