- 20 Marks
AA – Nov 2016 – L2 – Q4 – Audit Documentation
This question covers the need for a letter of representation, its content, and steps to be taken when management refuses to sign the letter.
Question
Polyet Nigeria Plc is into the manufacture of plastic materials. It has its factory in Apapa, Lagos, with distribution outlets spread across the country. A new Managing Director, Mr. KO has just been appointed. Shortly after the new Managing Director was appointed, your firm concluded the audit of the Company’s Financial Statements. A request was made from the newly engaged Managing Director for a letter of representation. He informs you in no uncertain terms that the company engaged you as the auditor to take responsibilities for your audit opinion, and that he is not ready to repeat in writing the information that the Chief Finance Officer, other accounting staff, and himself provided to you during the audit exercise. You tried to explain to him that it is standard practice to request a letter of representation from the Management, but he remained adamant.
Required:
a. Explain the need for the auditor to obtain a letter of representation from the management. (5 Marks)
b. Itemise TEN contents of a Letter of Representation. (10 Marks)
c. What steps should you take as the auditor if the Managing Director still persists in his refusal to sign the letter? (5 Marks)
(Total 20 Marks)
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