It is a requirement that the independent auditor obtain written representations from management as a part of an audit of procurement procedures performed and provides guidance concerning the representations to be obtained.
In essence, the letter states that all of the information submitted is accurate, and that all material information has been disclosed to the auditors. The auditors use this letter as part of their audit evidence. The letter also shifts some blame to management, if it turns out that some elements of the audited procurement records do not fairly represent the activities or conditions of the company. Following is a sample of the representations that may be included in the management representation letter: Management is responsible for the proper presentation of the procurement records in accordance with the applicable law.
All procurement 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
procurement records and activities noncompliance
There are no unrecorded transactions
The net effect of all uncorrected misstatements is immaterial
The management team acknowledges its responsibility for the system of internal controls
All related party transactions have been disclosed
All contingent liabilities have been disclosed
All unasserted claims or assessments have been disclosed
Auditors typically do not allow management to make any changes to the content of this letter before signing it, since this would effectively reduce the liability of management.
An auditor typically will not issue an opinion on a company‘s statements without first receiving a signed management representation letter.
If a representation made by management is contradicted by other audit evidence, the auditor should investigate the circumstances and consider the reliability of the representation made. Based on the circumstances, the auditor should consider whether his or her reliance on management’s representations relating to other aspects of the financial statements is appropriate and justified.
