Audit Communications & Representation Letters: What Auditors Must Get in Writing
Overview: Clear and documented communication with management and those charged with governance is critical to every audit. This includes getting a written management representation letter before issuing the audit report. Here’s what you need to know.
✅ What is a Management Representation Letter?
It’s a letter prepared by the auditor, printed on the client’s letterhead, and signed by management (usually the CEO and CFO). It confirms management’s explicit and implicit representations throughout the audit, covering all financial statements and periods reported.
📌 Why It’s Mandatory
- It’s the final piece of evidential matter.
- Required for an unmodified opinion — no letter means the auditor must disclaim or withdraw.
- Dated the same day as the auditor’s report.
✅ Main Purposes
- Confirm representations made during the audit.
- Document appropriateness and completeness of management’s assertions.
- Reduce misunderstandings about responsibilities.
✅ Key Content of the Letter
- Financial Statements: Management’s responsibility for fair presentation and internal controls.
- Completeness: All info, transactions, and access provided to the auditor.
- Fraud: Management’s responsibility to prevent/detect; any known or suspected fraud disclosed.
- Laws & Regulations: All known noncompliance disclosed.
- Uncorrected Misstatements: Listed and asserted immaterial, if any.
- Litigation: All known or possible litigation accounted for and disclosed.
- Related Party Transactions: Disclosed and properly accounted for.
- Subsequent Events: All required adjustments or disclosures made.
- Additional: Any new standards, impairments, estimates, or other matters.
✅ ERISA & ICFR Extras
- ERISA Plan Audits: Extra reps on plan documents, participant records, and Section 103(a)(3)(C) election if applicable.
- Integrated Audits: Management must confirm responsibility for ICFR, evaluation performed, significant deficiencies disclosed, and changes since year-end noted.
📌 What If Management Refuses?
If the client won’t sign the letter, the auditor must disclaim an opinion or withdraw. Doubts about the reliability of reps due to integrity concerns may lead to the same result.
✅ Helpful Tips
- Draft the letter in advance — no surprises.
- Review for consistency with other evidence — watch for contradictory info.
- Make sure it’s signed before releasing the report!
🔗 Helpful References
👉 Nail your final audit evidence — get that rep letter signed, complete, and ready to support your opinion!
