Management Representation

Management Representation – written / oral confirmation by them w.r.t. items included in financial statement.
Example :
(i) For Financial Statement as a whole.
(ii) For Accounting Policies.
(iii) Investments.
(iv) Provision for claims, etc.
Types of MRL :
(i) Letter issued by management.
(ii) Letter from auditor outlining his understanding, duly acknowledged and confirmed by management.
Elements :
 Addressed to Auditor.
 Dated and signed by proper authority.
 MRL date < AR date.
 For specific transfer there may be separate MRLs.
Management Representation as Audit Evidence :
 He should use his professional judgement to decide the areas in which MRL is required.
 Management Representation should be in writing.
 Auditor should seek corroborative evidences.
 Evaluate its reasonableness and consistency.
 Person rendering Management Representation should be well informed.
 Management Representation Letter can’t be substitute for other audit evidences.
 Sometimes it may be only evidence.
Documentation : of both types of Management Representation Letters