Question

Key Co. plans to present comparative financial statements for the years ended December 31, 2012 and 2013, respectively. Smith, CPA, audited Key's financial statements for both years and plans to report on the comparative financial statements on May 1, 2014. Key's current management team was not present until January 1, 2013. What period of time should be covered by Key's management representation letter?

1) January 1, 2012 through December 31, 2013.
2) January 1, 2012 through May 1, 2014.
3) January 1, 2013 through December 31, 2013.
4) January 1, 2013 through May 1, 2014.

Answer 1

The management representation letter for Key Co.'s comparative financial statements should cover the period from January 1, 2012, through May 1, 2014, to encompass all periods presented and the auditor's report date. So the correct Answer is option 2,

Step-by-step explanation:

The management representation letter should cover the period from January 1, 2012, through May 1, 2014. This is because the auditors need management's representations throughout the entire audit period, not just when the current management team was in place.

The representation letter should cover all periods presented in the comparative financial statements, plus the period up to the date of the auditor's report, to include any subsequent events that might affect the financial statements.The period of time that should be covered by Key's management representation letter is option 3) January 1, 2013 through December 31, 2013.

This is because Key's current management team was not present until January 1, 2013, so they are responsible for providing representation for that specific period. The comparative financial statements being presented are for the years ended December 31, 2012 and 2013, so the management representation letter should only cover the period during which the current management team was in control.