In your audit of the Learned Corporation you request a management "rep" letter. You are particularly interested in management's representations on 1. Irregularities involving management or employees.

2. Minutes of directors' meetings.

3. Compliance with laws and regulations.

4. Completeness of the accounting records.

5. Net realizable value of inventories.

6. Ownership of assets.

Required:

Using Figure 15-4 as an example, prepare a rep letter in good form covering the points listed above.

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AUDIT PROGRAM General Review of Statement of Changes in Financial Position 1. Verify the clerical accuracy of the statement by recalculation. 2. Ascertain that the statement format (eg, cccept of funds) is the most Informative in the circumstances. 3. Ascertain that the statement discloses all important aspects of the com- pany's financing and investing activities. 4. Determine that the statement discloses the important sources and uses of working capital (or cash). 5. Ascertain that the format correctly and prominently shows funds provided from operations and funds provided from or used by extraordinary items. 6. Verify that the statement is based on the balances shown in the audited financial statements at the beginning and end of the period covered by the audit. 7. Establish that a statement of changes in financial position is presented for each period for which an income statement is presented. 8. Trace, match, or agree statement amounts and like amounts in other finan- cial statements and/or in audit working papers. 9. Ascertain that the term "funds" used in the presentation is consistent with prior years. 10. Establish that a comparative schedule of working capitai elements is pre- sented. Figure 15-5. AUDIT PROGRAM: STATEMENT OF CHANGES IN FINANCIAL POSITION