ISA Implementation Support Module

Prepared by IAASB Staff

October 2010

Written Representations

• Introduction

• Significant Features of New Standard

– Basis for Requiring Written Representations

– Written Representations as Audit Evidence

– Source of Written Representations

– Management’s Responsibilities

– Specific Written Representations

– Dating of Written Representations

Overview

2

• The context for revising ISA 580

– Firms’ practices around the world regarding written representations had become inconsistent

– Evidence of excessive or undue reliance on written representations from quality control inspections

– Question of where primary responsibility for the financial statements lies as a result of a spate of major corporate scandals

Introduction

3

Basis for Requiring Written Representations

4

When other audit evidence cannot reasonably be

expected to exist

Old ISA 580 New ISA 580

To support other audit evidence

• Written representations are audit evidence

– They are necessary information used to arrive at audit conclusions

• However, on their own they cannot be relied upon for audit evidence to support audit conclusions

• A written representation defined as a written statement that management provides to the auditor to confirm certain matters or to support other audit evidence

– Not to be confused with an external confirmation

Written Representations as Audit Evidence

5

Source of Written Representations

6

Ordinarily management with primary responsibility for the

entity and its financial aspects

Old ISA 580 New ISA 580

Only from management who has responsibility for:

(1)Preparing and presenting financial statements; and(2)Is knowledgeable about the relevant matters

Management’s Responsibilities

7

Audit evidence that management acknowledges its responsibility for fair presentation of f/s

Old ISA 580

New ISA 580

Written representations that management has: (1)Fulfilled its responsibility for preparation and, where relevant, fair presentation of f/s; and(2)Provided auditor with all relevant information and access

ISA 210

• Two further requirements

– Written representations that all transactions have been recorded and are reflected in the financial statements − to support audit evidence regarding completeness

– Description of management’s responsibilities in written representations to be consistent with description of those responsibilities in agreed terms of engagement

• No requirement for written representation regarding fulfillment of management’s responsibility regarding internal control

Management’s Responsibilities

8

• Audit evidence about completeness cannot be obtained when:

– Management fails or refuses to provide the written representations regarding fulfillment of its responsibilities

– There is sufficient doubt about management’s integrity such that the written representations are not reliable

• Judgment about whether management has fulfilled its responsibilities cannot be formed on basis of other audit evidence in these circumstances

• Disclaimer of opinion required in such a case

Management’s Responsibilities

9

Specific Written Representations

10

ISA 580: Overarching basic principles on written representations

Specific written representations required

by other ISAs

Specific written representations auditor believes are necessary

To support other audit evidence

regarding specific aspects of f/s

To support other audit evidence

regarding specific assertions

• Date written representations as near as practicable to, but not after, date of audit report

– Written representations are necessary audit evidence without which audit opinion cannot be expressed

• Written representations should cover all financial statements and period(s) referred to in audit report

– Important for management to reaffirm that written representations for prior periods are still appropriate

– Requirement applies even if current management were not present during all periods referred in audit report

Dating of Written Representations

11

Note

This set of support slides does not amend or override the ISAs, the texts of which alone are authoritative. Reading the slides is not a substitute for reading the ISAs. The slides are not meant to be exhaustive and reference to the ISAs themselves should always be made. In conducting an audit in accordance with ISAs, the auditor is required to comply with all the ISAs that are relevant to the engagement.

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