Written representations defined

Written representations represent a written statement that is served by an entity’s management to its auditors with the purpose of confirming certain matters or to prove or support other audit evidence in an audit of financial statements. Written representations, by nature, do not include financial statements, the assertions provided therein, or supporting documents and records.

The auditors request written representations from management and, where appropriate, those charged with governance as to what extent they believe that significant assumptions used in making accounting estimates are reasonable.

Written representations are necessary information that the auditors seek to obtain from management in connection with the audit of the entity’s financial statements. And hence written representations are audit evidence, similar to responses to inquiries.

While written representations provide necessary audit evidence, they do not, per se, produce sufficient appropriate audit evidence about any of the matters involved therein. Furthermore, provision of reliable written representations does not affect the nature or extent of other audit evidence that the auditors secure about the management’s fulfillment of its responsibilities, or about specific assertions.

Management is considered responsible for the preparation and fair presentation of the financial statements in accordance with the applicable financial reporting framework or the preparation of financial statements that provide a true and fair view in accordance with the applicable financial reporting framework.

Written representations: examples

Written representations about accounting estimates recognized or disclosed in the financial statements may include representations:

• about the appropriateness of the measurement processes, including related assumptions and models, used by management in making accounting estimates within the boundaries defined by the applicable financial reporting framework, and the consistency in application of the processes.
• that the assumptions appropriately reflect management’s intent and ability to take certain measures or follow a specific course of action on behalf of the entity, as and where relevant to the accounting estimates and disclosures.
• that disclosures related to accounting estimates are complete and appropriate under the applicable financial reporting framework.
• that no subsequent event requires adjustment to the accounting estimates and disclosures included in the financial statements.

For those accounting estimates not reflected or disclosed in the financial statements, written representations may also include representations about:

• the appropriateness of the basis used by management for establishing that the recognition or disclosure criteria of the applicable financial reporting framework have not been met.
• for any accounting estimates not measured or disclosed at fair value, the appropriateness of the basis used by management to negate or challenge the presumption relating to the use of fair value set forth under the entity’s applicable financial reporting framework.