Management Representations 1943
taken as a whole.
5
(A summary of such items should be included in or
attached to the letter.)
6, 7
h. Management's acknowledgment of its responsibility for the design and
implementation of programs and controls to prevent and detect fraud.
i. Knowledge of fraud or suspected fraud affecting the entity involving
(1) management, (2) employees who have significant roles in internal
control, or (3) others where the fraud could have a material effect on
the financial statements.
[8]
j. Knowledge of any allegations of fraud or suspected fraud affecting the
entity received in communications from employees, former employees,
analysts, regulators, short sellers, or others.
k. Plans or intentions that may affect the carrying value or classification
of assets or liabilities.
l. Information concerning related-party transactions and amounts re-
ceivable from or payable to related parties.
9
m. Guarantees, whether written or oral, under which the entity is contin-
gently liable.
n. Significant estimates and material concentrations known to manage-
ment that are required to be disclosed in accordance with Financial
Accounting Standards Board (FASB) Accounting Standards Codifica-
tion (ASC) 275, Risks and Uncertainties.
o. Violations or possible violations of laws or regulations whose effects
should be considered for disclosure in the financial statements or as a
basis for recording a loss contingency.
10
p. Unasserted claims or assessments that the entity's lawyer has advised
are probable of assertion and must be disclosed in accordance with
FASB ASC 450, Contingencies.
11
5
If management believes that certain of the identified items are not misstatements, manage-
ment's belief may be acknowledged by adding to the representation, for example, "We do not agree
that items XX and XX constitute misstatements because [description of reasons]." [Footnote added,
effective for audits of financial statements for periods beginning on or after December 15, 1999, by
Statement on Auditing Standards No. 89.]
6
Paragraph .42 of section 312 states that the auditor may designate an amount below which mis-
statements need not be accumulated. Similarly, the summary of uncorrected misstatements included
in or attached to the representation letter need not include such misstatements. The summary should
include sufficient information to provide management with an understanding of the nature, amount,
and effect of the uncorrected misstatements. Similar items may be aggregated. [Footnote added, ef-
fective for audits of financial statements for periods beginning on or after December 15, 1999, by
Statement on Auditing Standards No. 89.]
7
The communication to management of immaterial misstatements aggregated by the auditor
does not constitute a communication pursuant to paragraph .17 of section 317, Illegal Acts by Clients,
Section 10A of the Securities Exchange Act of 1934, or paragraphs .38–.40 of section 316, Consid-
eration of Fraud in a Financial Statement Audit. The auditor may have additional communication
responsibilities pursuant to section 317, Section 10A of the Securities Exchange Act of 1934, or section
316. [Footnote added, effective for audits of financial statements for periods beginning on or after De-
cember 15, 1999, by Statement on Auditing Standards No. 89. Footnote renumbered by the issuance
of Statement on Auditing Standards No. 89, December 1999.]
[8]
[Footnote deleted by the issuance of Statement on Auditing Standards No. 99, October 2002.]
9
See section 334. [Footnote renumbered by the issuance of Statement on Auditing Standards No.
89, December 1999.]
10
See section 317. [Footnote renumbered by the issuance of Statement on Auditing Standards
No. 89, December 1999.]
11
See paragraph .05 of section 337, Inquiry of a Client's Lawyer Concerning Litigation,
Claims, and Assessments. If the entity has not consulted a lawyer regarding litigation, claims, and
(continued)
AU §333.06