Definition
The representation letter is signed by management, usually the CEO and CFO, and dated as of the date of the auditor's report. It confirms that management fulfilled its responsibility for the financial statements, gave the auditor all relevant information and access, and disclosed matters such as related parties, fraud and subsequent events.
Why it matters in an audit or review
AU-C 580 requires the letter, and it supports but never replaces other audit evidence. If management refuses to sign, the auditor must consider the effect on the opinion, which can include disclaiming one. The dating matters because it covers events up to the report date.
Example
Illustrative: field work ends on March 3 and the report is dated March 12. The letter is dated March 12 and signed that day, so it covers the nine days after fieldwork.
Common mistakes
- Dating the letter at fieldwork end instead of the report date.
- Leaving out the engagement-specific representations that apply.
- Treating a signed letter as a substitute for testing.
FAQ
Who should sign the management representation letter?
The people with overall responsibility for the financial statements and knowledge of the matters, typically the chief executive and chief financial officer.
Sources
- AICPA, AU-C Section 580, Written Representations
- AICPA, AU-C Section 700, Forming an Opinion and Reporting on Financial Statements (report date)
Definitions paraphrase AICPA and FASB guidance; read the standard itself before relying on a requirement. Example figures are illustrative. This page is guidance, not professional advice. Report an error