Auditing and Assurance Field Work Wrap up

Audit as a process is essential in ensuring that the financial
statements of an organization portray a true and fair view of the
performance of the organization.
Question 1: Management representation
Circumstances in which the auditor has to obtain a letter of
representation from the management
Where there is non-disclosure of material facts to the auditor, in such
cases the auditor has to get a letter of representation which as a
result will disclose the hidden facts.
Management representation is necessary when the auditor wants to
compliment the other procedures undertaken by him in conducting audit.
In most cases, the process of audit takes place through procedures that
provide information that will act as evidence. The evidence concerns
matters subject to management’s written representation.
The representations are essential in the confirmation of representations
available to the auditor implicitly or explicitly.
The auditor should obtain a written letter of representation for the
periods and financial statements that he has covered in his report
(Rittenberg, Johnstone & Gramling 2011).
Purposes of obtaining representations
The letter emphasizes that the organization’s financial statements are
representations of the management, and hence the management is primarily
responsible for the degree of their accuracy (Whittington & Delaney
The written representation provides evidence to the auditor that is of
internal nature. They achieve this by providing formal replies from the
management relating to the auditors questions.
In the letter, the management declares its responsibility of making
corrections on the material misstatements that may be present.
The representation enables the management to indicate the responsibility
it has in the design and appropriate implementation of controls and
programs, which will prevent fraud. The letter contains representations
that the auditor requires at the time when audit engagement was taking
The person to whom the letter should be addressed to and the date it
should be dated
A written representation letter by the management has to be addressed to
the person conducting the audit. The letter should contain relevant
information and a signature with the appropriate date indicated.
Normally the letter will have the same date as that of the auditor’s
report which contains the, financial information. This is because
signing should take place at the date when the auditor avails sufficient
evidence. The date can be the date prior to the date of the auditor’s
report. However, various events and transactions may call for
representation letters within the process of carrying out the process of
auditing (Louwers 2007).
Persons responsible for the signing of the representation
The letter of representation should be signed by the members of
management that is responsible for the organization. The members
include the chief financial officer, chief executive officer, and any
other person that has relevant knowledge of the organization’s
financial statements.
Respects in which the letter of representation relieves other
responsibilities of the auditor
Obtaining the letter of representation does not relieve the auditor of
any responsibilities. The letter is a requirement in the process of
obtaining audit evidence, thus it becomes a necessary thing that should
be done for the audit process to be effective.
Question 2: Audit simulation
Allison should include the case in the report and alert the management
on the situation. This should be done after collecting sufficient
evidence to present to them. The matter should be in the report because
it is of material nature and will have an effect in the financial
statements of the organization.
The management representation under certain circumstances can be signed
after the date of completion of the report. However, under no
circumstance should it be signed before the last day of completing the
investigation. In this regard the letter the letter presented by Nugget
is not valid since signing of the document took place on February 6,
2011, which is before the completion date of the report which was on
February 9, 2011.
Under normal circumstances, an auditor is relieves himself off any
responsibility after providing the audit opinion. In cases where
information concerning the financial statements develops it is the
auditors’ responsibility to evaluate the possibilities of supporting
the first opinion. From this angle, Colt should have evaluated and
investigated the outcome of the lawsuit.
Alta has to advice Saxe Company on the actions that it should take in
regard to the cash that was missing. This is because an auditor’s
opinion is relevant even after submitting the report. From Alta’s
investigations, the information that he came up with was relevant and
material to the financial statements of the company before it realizes
them (Flood 2012).
Myron as an auditor should present the misstatement he discovers to
Glomco. After that, he should not investigate the matter or take any
further action. This is because an audit aims in acting on misstatements
that are material to the financial statements.
Jill should gather the necessary evidence through thorough testing so as
to reduce the risk of detection. This will enable him to reduce the risk
of the audit that is to take place to a level that is acceptable.
The process of conducting audit involves various activities that are
important. They ensure that auditors give opinions that are reliable and
provide viable recommendations.
Whittington, R., & Delaney, P. R. (2012). Wiley CPA exam review 2012.
Hoboken, N.J: John Wiley & Sons.
Louwers, T. J. (2007). Auditing and assurance services. New York, NY:
Flood, J. (2012). Wiley practitioner`s guide to GAAS 2013: Covering all
SASs, SSAEs, SSARSs, and interpretations. Hoboken, N.J: Wiley.
Rittenberg, L. E., Johnstone, K. M., & Gramling, A. A.
(2011). Auditing. Mason, Ohio: South-Western.