In a financial statement audit performed in accordance with generally accepted auditing standards, the auditors are required to obtain a written letter from management that includes certain representations. In a July post, we discussed the reasons an external independent auditor would request their client to sign a management representation letter. In this posting, we discuss who should sign the letter.
The letter should be signed by those members of management with overall responsibility for financial and operating matters whom the auditor believes are responsible for and knowledgeable about, directly or through others in the organization, the matters covered by the representations in the letter. Such members of management normally include the chief executive officer and chief financial officer or others with equivalent positions in the entity.
If current management was not present during all periods covered by the auditor's report, the auditor should nevertheless obtain written representations from current management on all such periods.
In certain circumstances, the auditor may want to obtain written representations from other individuals. For example, he or she may want to obtain written representations about the completeness of the minutes of the meetings of stockholders, directors, and committees of directors from the person responsible for keeping such minutes. Also, if the independent auditor performs an audit of the financial statements of a subsidiary but does not audit those of the parent company, he or she may want to obtain representations from management of the parent company concerning matters that may affect the subsidiary, such as related-party transactions or the parent company's intention to provide continuing financial support to the subsidiary.
Please feel free to contact us if you have other questions.
