What is accurate concerning written representations?
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Answer: B. They should be used only when there is a lack of other substantive audit evidence
Explanation
Written representations cannot substitute for necessary substantive audit procedures when other evidence is available. Auditors must gather independent corroborating evidence rather than relying solely on management letters. Written representations serve as supportive evidence but require verification through other substantive tests. Written representations are formal signed statements provided by management to confirm certain matters. Auditing standards emphasize that representations are not conclusive audit evidence on their own. Substantive testing involves inspecting physical assets and testing records independently.
Management representations help document management responsibilities during complex financial statement audits. Relying too heavily on management word without testing would compromise audit independence and rigor. Auditors combine written statements with robust independent testing to form reliable audit opinions. Claiming they are the best source of evidence contradicts basic auditing standards regarding independence. Saying they should only be used without other evidence reverses proper evidentiary requirements. Shareholders do not receive copies of material written representations as these remain internal audit papers.
- Subject
- Accounting and Finance
- Category
- Auditing
- Topic
- —
- Difficulty
- medium
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