Question

The auditor relies on the management representation letter to reduce the possibility of misunderstanding concerning management's representations.

TRUE OR FALSE?

Answer 1

true, the auditor relies on the management representation letter to reduce the possibility of misunderstanding concerning management's representations in future

during an audit, management makes many representations to the auditor, both oral and written in response to enquiries and they serve as an evidential matter to the auditor.

written representations confirms the representations made by the auditor explicitly or implicitly

it reduces the possibility of misunderstandings concerning the matter that are subject to representations

thus the letter serves as a disclaimer to the company and hence it is important to be maintained to avoid future misunderstandings.