Written representations

The auditor should consider the impact of written representation on the audit opinion.

Compliance audit

Examination

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Instructions

Given the importance in the EU context of compliance with applicable laws and regulations, the auditor typically obtains written representations regarding compliance, in particular:

written acknowledgement by management of its responsibilities;
specific written representations, whether from management, those charged with governance, or employees with specialist knowledge regarding particular assertions.

Written acknowledgement by management of its responsibilities

Auditors should seek representations from the responsible party/parties, who are expected to provide a formal statement on the discharge of their responsibility for compliance with applicable laws and regulations. Such representations may cover, in particular, whether,

to the best of the official's knowledge and belief, the activities and financial transactions (and for compliance audits related to transactions underlying the financial statements, information reflected in the financial statements of the entity) are in compliance with the laws and regulations which govern them;
management has reasonable assurance that the internal controls put in place prevent and detect material instances of non-compliance;
all relevant information has been made available to the auditor.

Annual Activity Reports (AARs) and declarations

As regards legality and regularity audits, such representations are made in the AARs and declarations of assurance by the Directors-General, to which the

[a-glossary term="Discharge%20authority"]discharge authority[/a-glossary]

(European Parliament and Council) attaches considerable importance. In the AAR, the Director-General reports on the achievement of assigned political objectives, and describes and expresses a conclusion about the effectiveness of the internal control system. In this respect, they attach to their report a statement of the accounts (budgetary execution), and disclose any constraints the DG encountered in the course of its activities. The declaration of assurance by the Director-General states that: "I have/have not reasonable assurance that the resources assigned to the activities described in this report have been used for their intended purpose and in accordance with the principles of sound financial management, and that the control procedures put in place give the necessary guarantees concerning the legality and regularity of the underlying transactions." If there are recurring weaknesses in the system of internal control, or particular difficulties that may have an impact on the legality and regularity of the operations for which (s)he is responsible, the Director-General may express reservations in order to highlight such weaknesses.

Auditor's objective when reviewing the declaration of assurance by the Director- General

The auditor's objective is to note whether assurance is not given, or is qualified. Where this is the case, the auditor will consider the

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(Instructions for financial audit to be applied by analogy). The auditor is not required to report on whether the management representation is justified, but may report where (s)he has audit evidence that the information provided is significantly incorrect. Thus, the omission by the Director-General of material weaknesses, or a declaration which is incompatible with existing weaknesses, means that such written management representations are of no use as audit evidence. It is emphasised that management representations such as those contained in the AARs and declarations by Directors-General can never be a substitute for substantive tests of the operating effectiveness of controls.

Specific written representations regarding particular assertions

The auditor obtains specific written representations where necessary (whether from management, those charged with governance or employees with specialised knowledge) to corroborate other audit evidence. However, such specific written representations do not constitute sufficient appropriate audit evidence by themselves.

Evaluating the reliability of written representations

The auditor should:

evaluate whether the written representations appear reasonable and are consistent with other representations; and
consider whether the individual(s) making the representations can be expected to be well informed on the particular matters.

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Last Modified: 11/01/2021 15:56 Tags:

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Written representations

Instructions

Written acknowledgement by management of its responsibilities

Annual Activity Reports (AARs) and declarations

Auditor's objective when reviewing the declaration of assurance by the Director- General

Specific written representations regarding particular assertions

Evaluating the reliability of written representations

Written representations