Definition

It’s a written statement provided by management to confirm certain fact or to support other audit evidence obtained during audit fieldwork.

Written representation as audit evidence

It’s important to note that written representation is not appropriate audit evidence but support for the other evidence obtained during auditing financial statements.

Scope of ISA 580

This ISA covers the auditor’s responsibility concerning written representation.

The objective of ISA 580

This ISA aims to define the auditor’s responsibility to obtain a written representation from management about the completeness of information and preparation of the financial statements.

Requirement of ISA 580

Following are the requirements of ISA 580.

Written Representations about Management’s Responsibilities

The auditor shall request written representation about the appropriateness of financial statement preparation and knowledge of the matters concerned.

Appropriateness of financial statements means the management has fulfilled their responsibility for preparing financial statements in line with the financial reporting framework. Additionally, representation is taken to ensure management has provided access to data and completeness of transactions recorded in the financial statement or accounting record.

Other written representation

In line with other ISAs, the auditor can request written representation to support other audit evidence.

Form of written representation

The representation is obtained in letter form.

When there is doubt about the reliability of written representation

Suppose the auditor doubts the management’s competence, integrity, and ethical values. In that case, the auditor shall determine the impact of such concerns and assess their impact on forming an audit opinion.

When management does not provide the requested written statement

In this case, the auditor will discuss the matter with management, evaluate the reliability of audit evidence, and determine the impact on audit opinion.

Impact of Audit Opinion

Adverse audit reports will be issued when there is significant doubt about the entity’s integrity regarding representations required in terms of completeness of financial records, appropriate preparation of financial statements as per applicable financial reporting framework, and providing access to the auditor for executing audit procedures.

Wrap up

ISA 580 (written representation) defines the auditor’s scope for obtaining written representation from management. The written representation in letter form is obtained from management for their responsibility to prepare financial statements in line with applicable financial reporting framework, access to accounting records, and completeness of financial transactions.

If there is a doubt about management’s competence, ethics, and integrity, the auditor needs to evaluate the impact on the audit report, and an adverse opinion is issued in the following cases.

• Significant doubt on the reliability of written representation.
• No written representation is provided by management.