Final answer:
A management representation letter is a letter from management to the auditor acknowledging management's responsibility for the preparation of the financial statements. It serves as documentary evidence that management acknowledges its responsibility for the financial statements and provides information about completeness and accuracy. The letter includes statements about management's responsibility, completeness of information, compliance with laws and regulations, and absence of fraud.
Step-by-step explanation:
A management representation letter is a letter from management to the auditor acknowledging management's responsibility for the preparation of the financial statements. It is typically requested by the auditor during an audit engagement. The purpose of the letter is to obtain written representations from management about matters that are relevant to the audit.
The management representation letter serves as documentary evidence that management acknowledges its responsibility for the financial statements and provides information about the completeness and accuracy of the information provided to the auditor. It helps to reduce the auditor's risk by obtaining formal confirmation from management.
The content of the management representation letter may vary, but it typically includes statements about management's responsibility for the financial statements, the completeness of information provided, compliance with laws and regulations, and absence of fraud. The letter is usually signed by the chief executive officer, chief financial officer, or other members of management.