An auditor finishes fieldwork on a $92 million revenue audit and drafts a clean opinion. The CFO signs the representation letter, but the CEO refuses. She says she "doesn't want to put it in writing" that no fraud has been identified. The exam question is not whether you trust the CEO. It is whether the audit can be completed at all without her signature, which comes down to remembering which written representations must be obtained and understanding what the auditor does when management will not provide them.
HIGH-FREQUENCY: AU-C 580, Written Representations, requires the auditor to request and obtain written representations from management as a condition of completing the engagement. The letter is a separate, dated document (not an email or verbal acknowledgment) addressed to the auditor and signed before the report is issued. It serves two purposes: confirming management has fulfilled its responsibilities under the engagement letter and audit framework, and recording management's assertions on specific matters where written confirmation supports other audit evidence.
Common mistakes
- Treating the letter as a substitute for other evidence. The letter is the weakest form of audit evidence. It cannot replace confirmations, inventory observation, analytics, or any substantive procedure. An answer that says the auditor "may rely on the representation in lieu of confirmation" is wrong.
- Dating the letter incorrectly. The letter is dated as of the auditor's report date, not the balance sheet date or the end of fieldwork. It cannot be dated after the report and should not be dated significantly before it.
- Accepting a partial signature. When the engagement requires CEO and CFO signatures, a single signature is incomplete. A CFO signing alone because the CEO is "traveling" is not sufficient. The auditor must obtain the missing signature or treat the situation as a scope limitation.
Bottom line
- AU-C 580 requires the auditor to obtain a written representation letter at the end of every audit.
- Two purposes: confirm management has fulfilled its responsibilities and confirm specific assertions about the FS.
- Responsibility representations cover FS preparation, internal control, providing all relevant information (access), and completeness of recorded transactions.
- Specific FS assertions include subsequent events, related parties, going concern, litigation, fraud, uncorrected misstatements, and compliance with laws and regulations.
Exam shortcut
When a question asks what must be in the representation letter, look for the four responsibility items (FS prep, internal control, access, completeness) plus the specific FS assertions tied to other AU-C sections. Answer choices that drop any of the four responsibility items are wrong.
The full lesson (about 1,983 words, 13 min read) adds 1 worked example, all 5 common mistakes, a self-check, free in the app.
Learning objectives
- III.G1
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