Management Representation Letter
(Following draft may be used as an example – though it is recommended to carefully read and implement all points mentioned in standards on auditing and especially where specific representation is taken from the management. It is worth noting that representation of management is NOT an alternate to the audit procedures)
Example 1:
(Entity Letterhead)
(To Auditor) (Date)
This representation letter is provided in connection with your audit of the financial statements of ABC Company for the year ended March 31, 20XX for the purpose of expressing an opinion as to whether the financial statements are presented fairly, in all material respects, (or give a true and fair view) in accordance with the applicable accounting standards in India. We confirm that (,to the best of our knowledge and belief, having made such inquiries as we considered necessary for the purpose of appropriately informing ourselves ):
Financial Statements
- We have fulfilled our responsibilities, as set out in the terms of the audit engagement dated [insert date], for the preparation of the financial statements in accordance with Financial Reporting Standards; in particular the financial statements are fairly presented (or give a true and fair view) in accordance with the applicable accounting standards in India.
- Significant assumptions used by us in making accounting estimates, including those measured at fair value, are reasonable. (SA 540)
- Related party relationships and transactions have been appropriately accounted for and disclosed in accordance with the requirements of applicable accounting standards in India. (SA 550)
- All events subsequent to the date of the financial statements and for which applicable accounting standards in India require adjustment or disclosure have been adjusted or disclosed. (SA 560)
- The effects of uncorrected misstatements are immaterial, both individually and in the aggregate, to the financial statements as a whole. A list of the uncorrected misstatements is attached to the representation letter. (SA 450)
- [Any other matters that the auditor may consider appropriate (see paragraph A10 of SA 580).]
Information Provided
We have provided you with:
- Access to all information of which we are aware that is relevant to the preparation of the financial statements such as records, documentation and other matters,
- Additional information that you have requested from us for the purpose of the audit; and
- Unrestricted access to persons within the entity from whom you determined it necessary to obtain audit evidence.
All transactions have been recorded in the accounting records and are reflected in the financial statements.
We have disclosed to you the results of our assessment of the risk that the financial statements may be materially misstated as a result of fraud. (SA 240).
We have disclosed to you all information in relation to fraud or suspected fraud that we are aware of and that affects the entity and involves:
- Management;
- Employees who have significant roles in internal control; or
- Others where the fraud could have a material effect on the financial statements. (SA 240)
We have disclosed to you all information in relation to allegations of fraud, or suspected fraud, affecting the entity’s financial statements communicated by employees, former employees, analysts, regulators or others. (SA 240)
- We have disclosed to you all known instances of non-compliance or suspected non-compliance with laws and regulations whose effects should be considered when preparing financial statements. (SA 250)
We have disclosed to you the identity of the entity’s related parties and all the related party relationships and transactions of which we are aware. (SA 550)
[Any other matters that the auditor may consider necessary (see paragraph A11 of SA 580)].
Example 2:
LETTER OF REPRESENTATION FROM MANAGEMENT
(CLIENT LETTERHEAD)
Date: ________________
_____________________
(Auditor’s name and address)
Dear sir,
in connection with your work relating to the package used for _________(component’s name) in the Group consolidation of __________ (Group’s name) as of __________, we confirm, to the best of our knowledge and belief, the following representations made to you during the performance of your procedures.
- We have fulfilled our responsibilities for the preparation and presentation of the Group Reporting Package of _________(component’s name) as set out in the terms of the audit engagement dated (insert date) and, in particular, the financial information is presented in accordance with the reporting requirements of the Group.
- We have made available to you all:
a. financial records related data, contracts and agreements which could have a material impact on the financial statements.
b. minutes of the meetings of shareholders, directors, and committees of directors, or summaries of actions of recent meetings for which minutes have yet been prepared.
c. additional information that you have requested from us for the purpose of your work.
d. unrestricted access to persons within the entity from whom you determined it necessary to obtain audit evidence.
a. fraud involving management or employees who have significant roles in the internal control structure (except as follows:)
b. fraud involving other employees that could have a material effect on the financial information (except as follows:).
- We have disclosed to you the results of our assessment of the risk that the financial information may be materially misstated as a result of fraud, and also all information in relation to allegations of fraud or suspected fraud affecting the financial information.
- We have no plans or intentions that may materially affect the carrying value or classification of assets and liabilities or that may need disclosure in the financial information (except as follows:).
- The following have been properly recorded or disclosed in the financial information:
a. related party transactions and related amounts receivable or payable, including sales, purchases, loans, transfers, leasing arrangements, and guarantees.
b. arrangements with financial institutions involving compensating balances or other arrangements involving restrictions on cash balances and line-of-credit or similar arrangements.
c. agreements to repurchase assets previously sold.
a. violations or possible violations of laws or regulations or non-compliance with contractual agreements whose effects should be considered for disclosure or as a basis for recording a loss contingency (except as follows:).
b. other material liabilities or gain or loss contingencies or unasserted claims or assessments that are required to be accrued or disclosed.
c. actions or claims that would result in a material gain for ……………….. (component's name) (except as follows:).
- Provision, when material, has been made to reduce excess or obsolete inventories to their estimated net realizable value.
- The company has satisfactory title to all owned assets, and there are no liens or encumbrances on such assets nor has any asset been pledged (other than those disclosed in the financial statements).
- Provision has been made for any material loss to be sustained in the fulfilment of, or, from inability to fulfil, any sales or purchase commitments.
- Significant assumptions used by us in making accounting estimates, including those measured at fair value, are reasonable.
- The effects of uncorrected misstatements are immaterial, both individually and in the aggregate, to the financial information of the component as a whole.
- No events have occurred subsequent to the balance sheet date that would require adjustment to, or disclosure in, the financial information (except the following, which are appropriately reflected or disclosed in the financial information).
14. Related Party Transactions
Related-party transactions include issue of common stock, salary and allowances, reimbursement of expenses and amounts receivable from or payable to related parties.
List of Related parties:
We confirm the following as our related parties during the year ended March 31, 20xx.
15. Property, plant & equipment, and Intangibles
The additions during the period are stated at cost and include all capital expenditure, but do not include expenditure properly chargeable to revenue. The capitalization during the period is in accordance with Ind AS. No material amounts representing additions or improvements of a capital nature were charged to expense accounts.
The net book value of property, plant & equipment of INR XXXX as at March 31, 20XX which is arrived at after making above adjustments and providing depreciation of INR XXX for the year ended March 31, 20XX. Depreciation expense is provided in accordance with the depreciation rates as disclosed in the accounting policy.
The net book value represents all the property, plant & equipment owned by the Company wherever situated. The management has physically verified the situation and condition of the property, plant & equipment as at March 31, 20XX.
There are commitments for capital expenditure of INR XXXXX as at March 31, 20XX.
The Company is maintaining proper records showing full particulars, including quantitative details and situation of property, plant & equipment.
Cash & Cash Equivalents
The company has cash and cash equivalents of INR XXXX and balances with bank amounting to INR XXXXX as at March 31, 20XX. The company has received confirmation from banks for the balance in current accounts and the same is reconciling with the balance appearing in books of account. The management has physically verified the cash as at March 31, 20XX.
The Company has cash and cash equivalents of INR XXXX as at March 31, 20XX. This pertains to lien against corporate credit card of the company.
Other Current Assets
Account receivables of INR XXXX as at March 31, 20XX represent valid claims for sales up to and including March 31, 20XX.
Provision has been made for doubtful accounts of INR XXXXX as at March 31, 20XX.
The loans and advances are bifurcated between long term and short term as per the period of expected realization from the balance sheet date. The company has loans and advances of INR XXXX and provision has been made for doubtful advances of INR XXXX as at March 31, 20XX
We certify the value of inventories is INR XXXX as at March 31, 20XX. As a part of year end closing, the management has physically verified the existence of inventory as at year end and any deviations found with the books of account has been appropriately adjusted in the books of account.
Shareholder’s deficit
The Issued, Subscribed and Paid-up XXXX common stock and additional paid in capital of the company stands at INR XXXX as at March 31, 20XX which is equally held by Mr A (50%) and Mr P (50%).
Shareholders deficit is INR XXXXX as at March 31, 20XX.
Current Liabilities
All known liabilities have been put in the books of account and all disputed and unprovided liabilities have been disclosed as contingent liabilities.
The Company is generally regular in depositing undisputed statutory dues including sales tax, custom duty, cess and any other statutory dues with appropriate authorities and that there are no statutory dues as at the last day of the period concerned for a period of more than 6 months from the date, they become payable. There are no disputed amounts of sales tax, goods & services tax, income tax, custom duty, and cess.
The company has account payables amounting to INR XXXXX as at March 31, 20XX. The other current liabilities are INR XXXXX as at March 31, 20XX.
Accounts payable include INR XXXX payable to TT Pvt Ltd since FY 20XX-XX. The company has not received the corresponding collection of Rs. XXXX from M/s GMD which is outstanding receivable in the books of account and has been fully provided for in the statement of profit and loss of earlier years. There is no litigation proceedings from any party and do not foresee any additional liability to the abovementioned parties.
The company has accrued expenses amounting to INR XXXX as at March 31, 20XX. The accrued expenses include INR XXXX as at March 31, 20XX as commission payable to one of the agent.
Employee Benefits and Other Expenses
The company has paid staff salaries of INR XXXX during the year.
The Company has no applicability of the Payment of Gratuity Act, Employees Provident Fund.
Contingent Liabilities
There are no pending litigation and claims made by or on the company during the period or as at period end.
The Company has not given any guarantee for loans taken by others from a bank or financial institution.
There are no disputed amounts of statutory dues which should be disclosed as contingent liabilities.
There are no 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.
There are no side agreements or other arrangements (either written or oral) that have not been disclosed to you.
Statement of Operation
All materials transactions have been adequately disclosed and full provision has been made in the financial statements for all claims and losses of material amount which have resulted or may be expected to result from events which occurred or from commitments which were entered into on or before the date of balance sheet, including losses resulting from forward purchase and/or sale contracts.
No personal expenses have been charged to revenue accounts.
Except as disclosed in the financial statements, the results for the period were not materially affected by:
transactions of a nature not usually undertaken by the Company.
circumstances of an exceptional or non-recurring nature.
charges or credits relating to prior years; and
Changes in accounting policies.
The Company has dealt with items, which are covered by the object clause of the Memorandum of Association and has not commenced any business listed in the other objects of the Memorandum without obtaining the approval of the members by a special resolution.
Use of Estimates
Preparation of financial statements in conformity with GAAP require us to make estimates and assumptions that affect the amounts reported and disclosed in the financial statements and the accompanying notes. Actual results could materially differ from these estimates. On an ongoing basis we evaluate our estimates including those relating to fair values, intangible assets, useful lives of intangible assets, income tax, contingent liability among others. We base our estimates on assumptions both historical and forward looking that are believed to be reasonable, the results of which form the basis for making judgements about the carrying values of assets and liabilities.
General
The Company has complied with all aspects of contractual agreements that could have a material effect on the financial statements in the event of non-compliance. There has been no non-compliance with the requirements of regulatory authorities that could have a material effect on the financial statements in the event of non-compliance.
There are no long-term contracts & derivative contracts of the company.
The Company’s management is of the opinion that its international transactions with related parties are at arm’s length and that the Company is in compliance with the transfer pricing legislation. Based on the above, the Company’s management believes that the aforesaid legislation will not have any impact on the financial statements, particularly on the amount of tax expense and that of the provision for taxation.
We confirm that the other disclosures pursuant to the provisions of accounting standards are complete and accurate.
[signed]
(Name and Title)
