Multiple Choice Questions
The following questions concern communications between management, those charged with governance, and the auditor. Choose the best response.
a. A principal purpose of a letter of representation from management is to
(1) Serve as an introduction to company personnel and an authorization to examine the records.
(2) Discharge the auditor from legal liability for the audit.
(3) Confirm in writing management's approval of limitations on the scope of the audit.
(4) Remind management of its primary responsibility for financial statements.
b. The date of the management representation letter should coincide with the
(1) Balance sheet date.
(2) Date of the auditor's report.
(3) Date of the latest subsequent event referred to in the notes to the financial statements.
(4) Date of the engagement agreement.
c. Which of the following is not a required item to be communicated by the auditor to the audit committee or others charged with governance?
(1) Information about the auditor's responsibility in an audit of financial statements.
(2) Information about the overall scope and timing of the audit.
(3) Recommendations for improving the client's business.
(4) Significant findings arising from the audit.
d. A management letter
(1) Is the auditor's report on significant deficiencies and material weaknesses in internal control.
(2) Contains management's representations to the auditor documenting statements made by management to the auditor during the audit about matters affecting the financial statements.
(3) Is mandatory in all audits and must be dated the same date as the audit report.
(4) Contains recommendations from the auditor designed to help the client improve the efficiency and effectiveness of its business.