ISA 580

Written Representations

1Objective and scope

ISA 580 deals with the auditor's responsibility to obtain written representations from management and, where appropriate, those charged with governance. Written representations are audit evidence, but they are complementary to other evidence: they do not on their own provide sufficient appropriate evidence about any of the matters with which they deal, and they do not affect the nature or extent of other procedures. Their value lies in confirming that management has fulfilled its responsibilities and in supporting other evidence on matters that lie within management's knowledge and intent, where little other evidence exists. Other ISAs require specific representations (ISA 240, 250, 450, 501, 540, 550, 560, 570, 710, 720), all of which are gathered into the representation letter.

The objectives are to obtain written representations from management and, where appropriate, those charged with governance that they believe they have fulfilled their responsibility for the preparation of the financial statements and for the completeness of the information provided to the auditor; to support other audit evidence relevant to the financial statements or specific assertions by means of written representations, where determined necessary by the auditor or required by other ISAs; and to respond appropriately to written representations provided, or to a refusal, in accordance with the standard.

2Key definitions

3Requirements

Representations about management's responsibilities

• Request written representations that management has fulfilled its responsibility for the preparation of the financial statements in accordance with the applicable financial reporting framework, including where relevant their fair presentation, as set out in the terms of the audit engagement.
• Request written representations that management has provided the auditor with all relevant information and access as agreed in the terms of the engagement, and that all transactions have been recorded and are reflected in the financial statements.
• These representations describe management's responsibilities in the same terms as the engagement letter, so that the two documents bracket the audit: the letter of engagement sets the responsibilities, the letter of representation confirms they were met.

Other written representations

Other ISAs require representations on specific matters, and the auditor may determine that further representations are needed to support other evidence about the financial statements or specific assertions. The matters commonly covered:

Date, period, form and signatories

• The date of the written representations is as near as practicable to, but not after, the date of the auditor's report, and the representations cover all financial statements and periods referred to in the report. A representation dated after the report would be evidence obtained after the opinion was formed.
• The representations are in the form of a representation letter addressed to the auditor. Where law or regulation requires management to make written public statements about its responsibilities and the auditor determines those statements provide some or all of the representations, the relevant matters need not be included in the letter.
• The letter is requested from those with appropriate responsibilities and knowledge: the chief executive and chief financial officer, or those charged with governance where they sign the statements. The auditor drafts the letter; management signs it. Representations from a person who lacks the knowledge or authority to make them have little value.

Doubt about reliability, and refusal

• If the auditor has concerns about the competence, integrity, ethical values or diligence of management, or about its commitment to or enforcement of these, the auditor determines the effect on the reliability of representations (oral or written) and on audit evidence in general.
• If written representations are inconsistent with other audit evidence, the auditor performs procedures to attempt to resolve the matter; if unresolved, the auditor reconsiders the assessment of management's competence, integrity, ethical values or diligence, and the effect on the reliability of representations and evidence generally.
• If the auditor concludes that the written representations are not reliable, the auditor takes appropriate actions, including determining the possible effect on the opinion under ISA 705, considering the requirement to disclaim below.
• If management does not provide one or more of the requested representations, the auditor discusses the matter with management, re-evaluates management's integrity and the effect on the reliability of representations and evidence in general, and takes appropriate actions including determining the possible effect on the opinion.
• The auditor disclaims an opinion on the financial statements if the auditor concludes there is sufficient doubt about the integrity of management such that the representations about its responsibilities are not reliable, or if management does not provide the representations about its responsibilities (preparation of the statements, provision of information and access, completeness of transactions). A refusal on those fundamentals is a limitation on scope of pervasive effect.

4Documentation and reporting

The signed representation letter is filed as audit evidence, together with the auditor's evaluation of any inconsistency with other evidence, the discussion of any refusal, and the reassessment of management's integrity. Uncorrected misstatements are attached to or listed in the letter in support of the ISA 450 representation. Written representations are among the matters the auditor communicates to those charged with governance under ISA 260 (the auditor tells them what representations were requested). In the auditor's report, a refusal to provide the fundamental representations, or representations found unreliable, produces a disclaimer of opinion; a refusal on a specific matter is evaluated as a limitation on scope for that matter and may produce a qualified opinion where alternative evidence does not exist. The report itself does not mention the letter.

5Examinable focus