ISSAI 1580 The International Standards of Supreme Audit Institutions, ISSAI, are issued by the International Organization of Supreme Audit Institutions, INTOSAI. For more information visit www.issai.org. I N T O S A I Financial Audit Guideline – Written Representations This Financial Audit Guideline draws on the exposure draft of proposed International Standard on Auditing (ISA) 580 (Revised and Redrafted), “Written Representations” developed by the International Auditing and Assurance Standards Board (IAASB) and published by the International Federation of Accountants (IFAC). The proposed ISA is included in this Guideline with the permission of IFAC. Exposure Draft of INTOSAI Practice Note, pages 3-6 (ISA 580 enclosed for reference) For Comments 30 October 2008 – 30 January 2009 This is trial version www.adultpdf.com Table of Contents BACKGROUND 3 SCOPE OF THE ISA 3 CONTENT OF THE PRACTICE NOTE 3 APPLICABILITY OF THE ISA IN PUBLIC SECTOR AUDITING 3 ADDITIONAL GUIDANCE ON PUBLIC SECTOR ISSUES 4 PREMISE, RELATING TO MANAGEMENT’S RESPONSIBILITIES, ON WHICH AN AUDIT IS CONDUCTED 4 MANAGEMENT FROM WHOM WRITTEN REPRESENTATIONS REQUESTED 4 OTHER WRITTEN REPRESENTATIONSFEL! BOKMÄRKET ÄR INTE DEFINIERAT. COMMUNICATING A THRESHOLD AMOUNT 4 DOUBT AS TO THE RELIABILITY OF WRITTEN REPRESENTATIONS AND REQUESTED WRITTEN REPRESENTATIONS NOT PROVIDED 5 APPENDIX 1: ADDITIONAL EXAMPLES FOR APPENDIX 2 OF ISA 580 (REVISED AND REDRAFTED) “ILLUSTRATIVE REPRESENTATION LETTER” 6 This is trial version www.adultpdf.com 3 ISSAI 1580 Practice Note 1 to (Revised and Redrafted) International Standard on Auditing 580 – Written Representations Background This Practice Note provides supplementary guidance on (Revised and Redrafted) ISA 580 – Written Representations. It is read together with the ISA. The Practice Note is effective the same date as the ISA. Scope of the ISA This International Standard on Auditing (ISA) deals with the auditor’s responsibility to obtain written representations from management and, where appropriate, those charged with governance. Appendix 1 lists other ISAs containing subject-matter specific requirements for written representations. The specific requirements for written representations of other ISAs do not limit the application of this ISA. The ISA is effective for audits of financial statements for periods beginning on or after December 15, 2009. Content of the Practice Note P1. The Practice Note provides additional guidance for public sector auditors related to: a. Premise, relating to Management’s Responsibilities, on which an Audit is Conducted b. Management from whom Written Representations Requested c. Other Written Representations d. Communicating a Threshold Amount e. Doubt as to the Reliability of Written Representations and Requested Written Representations Not Provided f. Additional Examples for Appendix 2 of ISA 580 (Revised and Redrafted) – Illustrative Representation Letter Applicability of the ISA in Public Sector Auditing P2. ISA 580 (Revised and Redrafted) is applicable to auditors of public sector entities in their role as auditors of the financial statements. 1 All Practice Notes are considered together with General Considerations in the Financial Audit Guidelines. This is trial version www.adultpdf.com 4 Additional Guidance on Public Sector Issues P3. ISA 580 (Revised and Redrafted) contains application and other explanatory material with considerations specific to public sector entities in paragraph A11. Premise, relating to Management’s Responsibilities, on which an Audit is Conducted P4. The objectives of a financial audit in the public sector are often broader than to express an opinion whether the financial statements have been prepared, in all material respects, in accordance with the applicable financial reporting framework (i.e., the scope of the ISAs). The audit mandate, or obligations arising from legislation, regulation, ministerial directives, government policy requirements, or resolutions of the legislature may result in additional objectives. These additional objectives may include audit and reporting responsibilities, for example, relating to reporting whether the auditor found any instances of non-compliance with authorities including budget and accountability and/or reporting on the effectiveness of internal control. P5. In the public sector management’s responsibilities may also be broader than those responsibilities in the private sector. An audit in accordance with ISAs, however, is conducted on the premise, relating to management’s responsibilities, set out in ISA 2102 (Redrafted)and referred to in paragraphs A2-A3 of ISA 580 (Revised and Redrafted) Public sector auditors therefore may need to consider the premise, relating to management’s responsibilities, on which the public sector audit is conducted. When requesting written representations about management’s responsibilities, public sector auditors take this broader premise into account. Management from whom Written Representations Requested P6. When considering the guidance in A4 of ISA 580 (Revised and Redrafted) public sector auditors take into account that requirements with regard to responsibility for preparation and presentation of financial statements may vary as stipulated by legislation. Public sector auditors familiarize themselves with applicable legislation to identify those from whom written representations should be requested. Public sector auditors may also inform and agree, at the planning stage, with those charged with governance on those individuals identified as responsible for providing written representations. Communicating a Threshold Amount P7. According to Paragraph A16 of ISA 580 (Revised and Redrafted), the auditor may consider communicating to management a threshold for purposes of the requested written representations. Public sector auditors take into account the broader public sector perspective by which they may be required to communicate all misstatements, even those that have been corrected by the 2 ISA 210 – Agreeing the Terms of Audit Engagements. This is trial version www.adultpdf.com 5 entity, and all control deficiencies, and instances of non-compliance with authorities. For purposes of requesting written representations public sector auditors may consider communicating such requirements. Date of and Period(s) Covered by Written Representations P8. As stated in paragraph A17 the date of the written representations should be as near as practical to the date of the auditor’s report on the financial statements. In the public sector management representations may sometimes be obtained from high governance levels and it is therefore important for public sector auditors to plan in advance so that written representations may be obtained in time to avoid any delay in issuing the audit report. Doubt as to the Reliability of Written Representations and Requested Written Representations Not Provided P9. Public sector auditors may be appointed in accordance with statutory procedures and, therefore, may not be in a position to decline or resign from an engagement as suggested in paragraph A26 of ISA 580 (Revised and Redrafted). In such cases, public sector auditors may report to the legislature as appropriate. This is trial version www.adultpdf.com 6 Appendix 1: Additional Examples for Appendix 2 of ISA 580 (Revised and Redrafted) “Illustrative Representation Letter” Appendix 2 of the ISA 580 (Revised and Redrafted) provides an illustrative example of a representation letter. Based on the relevant legislation or audit mandate public sector auditors may include additional items such as: Whether the activities and the financial transactions are in compliance with the authorities that govern them. Whether the internal control systems have functioned effectively throughout the period covered by the audit. Whether the internal audit function has operated effectively throughout the period covered by the audit. Whether the government program XYZ has been carried out in an economical, efficient and effective manner. Whether management has provided its interpretation of compliance requirements that may have varying interpretations. Whether all contracts, grant agreements and other correspondence in regard to agreements involving use of program funds has been made available. Whether management has disclosed all contracts and agreements with service organizations, including any communication with those service organizations relating to instances of non-compliance This is trial version www.adultpdf.com ISA 580 (Revised and Redrafted) April 2008 International Auditing and Assurance Standards Board Revised and Redrafted International Standard on Auditing ISA 580, Written Representations This is trial version www.adultpdf.com 2 International Auditing and Assurance Standards Board International Federation of Accountants 545 Fifth Avenue, 14th Floor New York, New York 10017 USA This International Standard on Auditing (ISA) 580 (Revised and Redrafted), “Written Representations” was prepared by the International Auditing and Assurance Standards Board (IAASB), an independent standard-setting body within the International Federation of Accountants (IFAC). The objective of the IAASB is to serve the public interest by setting high quality auditing and assurance standards and by facilitating the convergence of international and national standards, thereby enhancing the quality and uniformity of practice throughout the world and strengthening public confidence in the global auditing and assurance profession. This publication may be downloaded free of charge from the IFAC website: http://www.ifac.org. The approved text is published in the English language. The mission of IFAC is to serve the public interest, strengthen the worldwide accountancy profession and contribute to the development of strong international economies by establishing and promoting adherence to high quality professional standards, furthering the international convergence of such standards and speaking out on public interest issues where the profession’s expertise is most relevant. Copyright © April 2008 by the International Federation of Accountants (IFAC). 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ISBN: 978-1-934779-18-7 This is trial version www.adultpdf.com 3 INTERNATIONAL STANDARD ON AUDITING 580 (REVISED AND REDRAFTED) WRITTEN REPRESENTATIONS (Effective for audits of financial statements for periods beginning on or after December 15, 2009) CONTENTS Paragraph Introduction Scope of this ISA 1-2 Written Representations as Audit Evidence 3-4 Effective Date 5 Objectives 6 Definitions 7-8 Requirements Management from whom Written Representations Requested 9 Written Representations about Management’s Responsibilities 10-12 Other Written Representations 13 Date of and Period(s) Covered by Written Representations 14 Form of Written Representations 15 Doubt as to the Reliability of Written Representations and Requested Written Representations Not Provided 16-20 Application and Other Explanatory Material Written Representations as Audit Evidence A1 Premise, relating to Management’s Responsibilities, on which an Audit is Conducted A2-A3 Management from whom Written Representations Requested A4-A8 Written Representations about Management’s Responsibilities A9-A11 Other Written Representations A12-A15 Communicating a Threshold Amount A16 Date of and Period(s) Covered by Written Representations A17-A20 Form of Written Representations A21-A23 Communication with Those Charged with Governance A24 Doubt as to the Reliability of Written Representations and Requested Written Representations Not Provided A25-A29 This is trial version www.adultpdf.com INTERNATIONAL STANDARD ON AUDITING 580 (REVISED AND REDRAFTED) 4 Appendix 1: List of ISAs Containing Requirements for Written Representations Appendix 2: Illustrative Representation Letter International Standard on Auditing (ISA) 580 (Revised and Redrafted), “Written Representations” should be read in conjunction with [proposed] ISA 200 (Revised and Redrafted), “Overall Objective of the Independent Auditor, and the Conduct of an Audit in Accordance with International Standards on Auditing.” This is trial version www.adultpdf.com [...]... requirements for written representations of other ISAs do not limit the application of this ISA Written Representations as Audit Evidence 3 Audit evidence is all the information used by the auditor in arriving at the conclusions on which the audit opinion is based.1 Written representations are necessary information that the auditor requires in connection with the audit of the entity’s financial statements... inconsistent with other audit evidence, the auditor shall perform audit procedures to attempt to resolve the matter If the matter remains unresolved, the auditor shall reconsider the assessment of the competence, integrity, ethical values or diligence of management, or of its commitment to or enforcement of these, and shall determine the effect that this may have on the reliability of representations... representations are audit evidence (Ref: Para A1) 4 Although written representations provide necessary audit evidence, they do not provide sufficient appropriate audit evidence on their own about any of the matters with which they deal Furthermore, the fact that management has provided reliable written representations does not affect the nature or extent of other audit evidence that the auditor obtains about the. .. other audit evidence relevant to the financial statements or one or more specific assertions in the financial statements, the auditor shall request such other written representations (Ref: Para A12-A15, A16, A24) Date of and Period(s) Covered by Written Representations 14 The date of the written representations shall be as near as practicable to, but not after, the date of the auditor’s report on the. .. requested by the auditor [Proposed] ISA 500 (Redrafted), “Considering the Relevance and Reliability of Audit Evidence,” paragraph [3] 5 This is trial version www.adultpdf.com INTERNATIONAL STANDARD ON AUDITING 580 (REVISED AND REDRAFTED) Definitions 7 For purposes of the ISAs, the following term has the meaning attributed below: Written representation – A written statement by management provided to the auditor... engagement2 and, in particular, whether the financial statements are prepared and presented in accordance with the applicable financial reporting framework (Ref: Para A9-A11, A16, A24) Information Provided to the Auditor 11 The auditor shall request management to provide a written representation that it has provided the auditor with all relevant information agreed in the terms of the audit engagement, 3 and that... written) and audit evidence in general (Ref: Para A25) 18 4 If the auditor has concerns about the competence, integrity, ethical values or diligence of management, or about its commitment to or enforcement of these, the auditor shall determine the effect that such concerns may have on the reliability of representations (oral or written) and audit evidence in general (Ref: Para A26-A27) If the auditor concludes... the fulfillment of management’s responsibilities, or about specific assertions Effective Date 5 This ISA is effective for audits of financial statements for periods beginning on or after December 15, 2009 Objectives 6 The objectives of the auditor are: (a) (b) To support other audit evidence relevant to the financial statements or specific assertions in the financial statements by means of written representations... transactions have been recorded and are reflected in the financial statements (Ref: Para A9-A11, A16, A24) Description of Management’s Responsibilities in the Written Representations 12 Management’s responsibilities shall be described in the written representations required by paragraphs 10 and 11 in the manner in which these responsibilities are described in the terms of the audit engagement (Ref: Para A3)... and knowledge of the matters concerned (Ref: Para A4-A8) Written Representations about Management’s Responsibilities Preparation and Presentation of the Financial Statements 10 The auditor shall request management to provide a written representation that it has fulfilled its responsibility for the preparation and presentation of the financial statements as set out in the terms of the audit engagement2 . ISSAI 1580 The International Standards of Supreme Audit Institutions, ISSAI, are issued by the International Organization of Supreme Audit Institutions, INTOSAI. For. prepared by the International Auditing and Assurance Standards Board (IAASB), an independent standard-setting body within the International Federation of Accountants (IFAC). The objective of the. to serve the public interest by setting high quality auditing and assurance standards and by facilitating the convergence of international and national standards, thereby enhancing the quality