• The reason why we need to obtain a letter of representation before signing the audit report is because the information in the letter of representation forms part of the sufficient and appropriate audit evidence needed to form an opinion that the financial statements give a true and fair view.
• It’s a requirement under ISA 580 that the auditor must obtain letter of representation in respect of management responsibility for preparation of the financial statements and giving the auditor all the information they require for the purpose of the audit
• There are various auditing standards which require the auditor to obtain letter of representation from management. Examples include ISA:240,250,450,501,540,550,560,570,710
• The auditor may also find out during the audit that evidence on some items are confined to management or are matters of management judgement. In this case the auditor is required under auditing standards to request representation on those items as audit evidence. Even though this does not absolve the auditor form performing procedures to substantiate the items.

(4 points @ 1.5 marks each =6 marks)

• Competence, integrity, ethical values or diligence of management.
• Inconsistency of written representation with other evidence obtained by the auditor. The auditor will seek to resolve the latter by performing audit procedures. If it remains unresolved, particularly in addition to the first point the auditor will have to take appropriate actions including modifying the audit report in accordance with ISA 705