You are the auditor of Cocona Fans Manufacture Inc. ("Cocona") and are in the process of completing the audit for the year ended 31 December 20x0. You note the following two outstanding matters upon reviewing audit completion documentation.

(i) You have heard rumors that Cocona is planning to disposal of a major asset. If accurate,

this will have disclosure implications. Cocona’s management has advised you that although they have had several meetings with the potential purchaser, there is no decision reached. Cocona’s management considers providing a letter of representation confirming their intentions.

(ii) The invoice relating to the purchase of an expensive plant and machinery cannot be found and provided to you for the audit. Cocona’s management has been seeking your advice if the invoice is lost.

Required

(a) Discuss the functions of a client representation letter. 

(b) Is a letter of representations provided by Cocona sufficiently to resolve the two audit

issues (i) and (ii)? Justify your answer. 

Answer rating: 100% (QA)

Answer 1 The client representation letter is a form letter written by a companys external auditors w... View the full answer