Written Representations & Completing the Audit

Why this topic matters

The completion phase pulls everything together: evaluating misstatements, reviewing subsequent events, obtaining written representations, communicating with those charged with governance, and dating the report. Auditing and Attestation (AUD) Area IV (Forming Conclusions and Reporting, 10–20%) tests each step and the auditor's duties for facts discovered after the report.

Evaluating misstatements

• Accumulate all misstatements identified, other than those that are clearly trivial.
• Classify them as factual (no doubt), judgmental (differences in estimates or policy choices), or projected (the auditor's best estimate from a sample).
• Communicate them to the appropriate level of management on a timely basis and request correction of all of them.
• If management refuses, understand the reasons and consider them in evaluating qualitative aspects of the entity's practices, including possible bias.
• Evaluate whether uncorrected misstatements, individually or in aggregate, are material — considering size, nature, circumstances, and the effect of prior-period uncorrected misstatements.
• If the aggregate approaches materiality, the risk that undetected misstatements push it over is higher — consider more procedures or further corrections.

Subsequent events

Period	Auditor's responsibility
Balance sheet date → report date	Active — perform procedures to identify events requiring adjustment or disclosure
Report date → report release date	Passive — no duty to search, but act on facts that become known
After report release	No duty to search; if facts become known that would have affected the report, apply the subsequent discovery rules

Subsequent events procedures (through the report date)

• Understand management's procedures for identifying subsequent events.
• Inquire of management and those charged with governance about subsequent events.
• Read minutes of meetings held after year-end; read the latest interim financial statements.
• Obtain the lawyers' letters (dated close to the report date) and written representations.
• Examine significant transactions after year-end (cutoff, subsequent collections and payments).

Dating when a new subsequent event is found after the report date

• Dual dating: keep the original report date, and add a later date for the specific note ("…except for Note X, as to which the date is…"). Responsibility for events after the original date is limited to that note.
• Redating: move the whole report to the later date — responsibility extends to all events up to the new date, so subsequent events procedures must be extended.

Subsequent discovery of facts after the report is released

If the auditor becomes aware of a fact that existed at the report date and would have changed the report:

1. Discuss with management and those charged with governance; determine whether the statements need revision.
2. If revised: perform necessary procedures, issue a new report on the revised statements (with an emphasis-of-matter or other-matter paragraph referring to the revision), and ensure users are informed.
3. If management refuses and users are relying on the statements: notify management and those charged with governance, and take steps to prevent future reliance on the report — for example, notifying regulators and known users — generally after consulting legal counsel.

Omitted procedures discovered after the report release date

Assess the importance of the omitted procedure. If it impairs the ability to support the opinion and users are still relying on the report, promptly perform the omitted procedure or alternative procedures. If results reveal facts that would have changed the report, apply the subsequent discovery rules. If the procedure can't be performed, consult legal counsel.

Written representations

• Requested from management with appropriate responsibility — normally the chief executive officer (CEO) and chief financial officer (CFO) — addressed to the auditor.
• Dated the same as the auditor's report, covering all periods reported on.
• Contents include: management fulfilled its responsibility for the financial statements under the framework; provided all relevant information and access; all transactions are recorded; responsibility for internal control; knowledge of fraud or suspected fraud; noncompliance with laws; related parties; subsequent events; litigation and claims; uncorrected misstatements are immaterial (with a summary attached); significant assumptions in estimates are reasonable.
• Representations complement, but do not replace, other audit evidence.

Communicating with those charged with governance

• The auditor's responsibilities and the planned scope and timing of the audit (without compromising effectiveness).
• Significant findings: qualitative aspects of accounting practices, significant difficulties encountered, disagreements with management, uncorrected misstatements, material corrected misstatements, significant matters discussed with management, written representations requested, and consultations with other accountants.
• Communication may be oral or written, but significant findings must be in writing if oral communication would not be adequate.

Final steps

• Perform final analytical procedures (required).
• Complete the engagement quality review where required — no report release until it is done.
• Obtain lawyers' letters, review documentation, and evaluate the overall presentation.
• Report date: no earlier than the date sufficient appropriate evidence is obtained — including evidence that the statements and disclosures are prepared and management has asserted responsibility for them.
• Assemble the final audit file within 60 days of the report release date.

How it is tested

• Distinguish active and passive subsequent events responsibilities.
• Choose dual dating versus redating.
• Respond to subsequently discovered facts and omitted procedures.
• Identify representation letter contents, date, signers, and the effect of refusal.