Which of the following statements is not true with respect to management representations obtained as per AAS-11?
|a) Authenticated copy of relevant minutes of meetings may be regarded as management representation|
b) It should always be in working
c) It may be dated prior to the report date
d) It should be addressed to the auditor
The Correct Answer Is:
b) It should always be in working
Correct Answer Explanation : b) It should always be in working
“It should always be in working” Management representations obtained as per AAS-11 (the standard on “Representation by Management”) do not necessarily have to be “in working” at all times. In fact, the representations are often obtained from management as formal written statements confirming various aspects of financial statements.
These representations might not always reflect the current state of operations or the momentary working conditions. Hence, the requirement for these representations to be ‘always in working’ is not accurate.
Management representations are formal assertions made by the management of an entity to the auditor regarding various aspects of financial statements and related matters. These representations serve as a means for management to corroborate the information presented in the financial statements and provide additional assurances to the auditor.
Management representations are more like a snapshot of information provided at a specific point in time rather than a continuous update of working conditions. They are generally prepared and provided to the auditor at a specific stage during the audit process.
Explanation of why other answers are not correct:
a) Authenticated copy of relevant minutes of meetings may be regarded as management representation:
This statement is accurate. Minutes of meetings, particularly those that involve discussions and decisions related to financial reporting matters, can be considered a form of management representation.
These minutes often contain important details about management’s discussions and decisions, serving as evidence supporting the assertions made by management to the auditor.
c) It may be dated prior to the report date:
This statement is true within the context of management representations. The representations provided by management might be dated before the report date. This is common because they often capture information or assertions up to a specific date in the past, which might not necessarily coincide with the report date.
As long as the information is relevant and accurate up to that specific date, it is considered valid for the audit process.
d) It should be addressed to the auditor:
This statement is generally accurate as well. Management representations are usually directed towards the auditor or the auditing firm. Addressing these representations to the auditor ensures that they are specifically intended for the audit purpose.
This practice establishes clarity about the recipient and the purpose of the provided information.
These aspects highlight the diverse nature of management representations, which can take various forms (such as meeting minutes) and may not necessarily be aligned with the report date due to their focus on information up to a specific point in time.
Additionally, addressing these representations to the auditor ensures their relevance to the audit process, emphasizing their importance as a means of communication between management and the auditor.
Understanding these points aids auditors in utilizing diverse sources of evidence, such as meeting minutes or formal letters, dated before the report date, to validate the accuracy and completeness of financial information within a specified timeframe.
These representations play a crucial role in the audit process despite not always reflecting real-time or ongoing operational details.
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