Management Representations

Management Representations

72 The auditor shall endeavour to obtain written representations from management regarding the reasonableness of significant assumptions, including whether they appropriately reflect management’s intent and ability to carry out specific courses of action on behalf of the entity where relevant to the fair value measurements or disclosures.

73 ASA 580 Management Representations, discusses the use of management representations as audit evidence. Depending on the nature, materiality and complexity of fair values, management representations about fair value measurements and disclosures contained in the financial report may also include representations about:

• the appropriateness of the measurement methods, including related assumptions, used by management in determining fair values within the applicable financial reporting framework, and the consistency in application of the methods;
• the basis used by management to overcome the presumption relating to the use of fair value set forth under the entity’s applicable financial reporting framework;
• the completeness and appropriateness of disclosures related to fair values under the entity’s applicable financial reporting framework; and
• whether subsequent events require adjustment to the fair value measurements and disclosures included in the financial report.

In the event management is unable to or refuses to provide a written representation, under ASA 580 Management Representations, the auditor needs to consider the implications of the refusal for the auditor’s report.