[professionalskeptic]

here is a question i came across today

Key Co. plans to present comparative financial statements for the years ended December 31, 20X1 and 20X2, respectively. Smith, CPA, audited Key’s financial statements for both years and plans to report on the comparative financial statements on May 1, 20X3. Key’s current management team was not present until January 1, 20X2. What period of time should be covered by Key’s management representation letter?

A.

January 1, 20X1, through December 31, 20X2

B.

January 1, 20X1, through May 1, 20X3

C.

January 1, 20X2, through December 31, 20X2

D.

January 1, 20X2, through May 1, 20X3

You answered A. The correct answer is B.

Even if the current executive team was not responsible for management of the client during all the periods covered by the auditor’s report, the auditor should still obtain written representations from current management on all periods covered by the report. Because the auditor is concerned with events occurring through the date of his or her report, the representations should be made as of a date no earlier than the date of the auditor’s report.

My question: From what I’ve gathered, the auditor only obtains the rep letter after the audit is complete so why does he have to obtain the rep letter though May 20X3 in this question when that period is not even covered in the report?

FAR - 11/18/15 - 74, 04/29 - 70 overworked myself to the last day and was burnt out at the exam.
AUD - 01/18/16 - 74 AGAIN FML, retake - only going to schedule when I feel happy with my prep.

[Kmay89]

The management rep letter has to be dated as of the audit report because that is the date of which you have audited through. Although the time period goes through May, the auditor still has to look at subsequent events that occurred after the year end date of the financial until the date the report is issued to see if there are any events that need disclosure in a foot note. The management rep letter is dated through that date to hold management responsible for telling the auditors about all events through issue date that could create a financial statement or foot note issue.

BEC- 93
FAR- 9/6/2016
AUD- 10/7/2016
REG- 11/21/2016

Wiley CPAexcel Self Study & Ninja supplements

[professionalskeptic]

@Kmay89 thanks for replying. I agree, the rep letter has to be as of the date of the audit report in consideration of subsequent events. I was reading the question wrong. I thought that the question said auditor ‘plans' to perform the audit for the period ended may 20X3. I gotta read them questions carefully!

FAR - 11/18/15 - 74, 04/29 - 70 overworked myself to the last day and was burnt out at the exam.
AUD - 01/18/16 - 74 AGAIN FML, retake - only going to schedule when I feel happy with my prep.

[GitRDone2017]

This is from the Ninja book for an explanation to the question, it is in book 3 pg. 116
“B- Even if the current executive team was not responsible for management of the client during all the periods covered by the auditor's report, the auditor should still obtain written representations from current management on all periods covered by the report. Because the auditor is concerned with events occurring through the date of his or her report, the representations should be made as of a date no earlier than the date of the auditor's report.” I hope it is ok to post this, it is directly from Ninja 🙂

"Confidence is going after Moby Dick in a rowboat and taking tartar sauce with you" - Zig Ziglar
Ninja book + Ninja MCQ + Roger
AUD Oct 2016
FAR Nov 2016
BEC ?
REG?

[professionalskeptic]

Thanks for the excerpt @gitrdone2017!

FAR - 11/18/15 - 74, 04/29 - 70 overworked myself to the last day and was burnt out at the exam.
AUD - 01/18/16 - 74 AGAIN FML, retake - only going to schedule when I feel happy with my prep.

[Author]

Replies