Question

Which of the following items would appear in written representations in the audit of a public entity but not a nonpublic entity?

1) Management representation letter
2) Audit engagement letter
3) Financial statements
4) Internal control documentation

Answer 1

In the audit of a public entity, internal control documentation would be present due to requirements like SOX, unlike in a nonpublic entity audit. Management representation letter, audit engagement letter, and financial statements are common to both audits.

Step-by-step explanation:

The item that would appear in written representations in the audit of a public entity but not a nonpublic entity is internal control documentation. Public companies are subject to Sarbanes-Oxley Act (SOX) requirements, which necessitate management to report on the effectiveness of the company's internal controls over financial reporting. This type of documentation is typically more detailed and formalized in a public entity's audit as compared to a nonpublic entity, which may not have the same requirements. All entities typically have a management representation letter and an audit engagement letter. Furthermore, financial statements are a common element within all audits, regardless of the entity's public or nonpublic status.