Question

Which of the following is not a purpose of the management representation letter?

a. It reminds management of its responsibility for the financial statements.

b. It confirms oral responses obtained by the auditor earlier in the audit and the continuing appropriateness of those responses.

c. It decreases the possibility of misunderstanding concerning the matters that are the subject of the representations.

d. It implies that the auditor is responsible for the design of the internal controls.

Answer 1

Option (d) is not a purpose of the management representation letter; instead, it incorrectly suggests that the auditor, rather than management, is responsible for the design of internal controls.

Step-by-step explanation:

The purpose of a management representation letter is for management to acknowledge its responsibility for the financial statements, confirm the veracity of the information provided to auditors, and reduce the chances of misunderstandings between the management and the auditors regarding the financial information and representations made during the audit. Answer choice (d) It implies that the auditor is responsible for the design of the internal controls is not the purpose of the management representation letter. In fact, this statement is incorrect because the management, not the auditor, is responsible for the design and maintenance of internal controls within the organization.