Question

As part of an audit, a CPA often requests a representation letter from the client. Which one of the following is not a valid purpose of such a letter?

a. To provide audit evidence.
b. To emphasize to the client their responsibility for the fairness of the financial statements.
c. To satisfy himself or herself that a certain account balance is fairly stated when certain customary auditing procedures are not performed.
d. To provide possible protection to the CPA against a charge of knowledge in cases where fraud is subsequently discovered to have existed in the accounts.

Answer 1

The representation letter in an audit is not used to satisfy the auditor that a certain account balance is fairly stated when customary auditing procedures are not performed. It serves to provide audit evidence, emphasize the client's responsibility, and offer potential legal protection to the CPA.

Step-by-step explanation:

The purpose of a representation letter in an audit is: a) to provide audit evidence, b) to emphasize to the client their responsibility for the fairness of the financial statements, and d) to provide possible protection to the CPA against a charge of knowledge in cases where fraud is subsequently discovered to have existed in the accounts. However, choice c), "To satisfy himself or herself that a certain account balance is fairly stated when certain customary auditing procedures are not performed," is not a valid purpose of such a letter. Management's responsibility for the financial statements includes the accuracy of the financial data presented, and while a representation letter may remind them of this fact, it cannot serve as a substitute for audit procedures that have been omitted or were unable to be performed.