ExpertMinds LogoExpertMinds
Medium2 marksMultiple Choice
Review and ReportingISA 580Written RepresentationsAudit Evidence

ACCA · Question 15 · Review and Reporting

CASE SCENARIO: Global Freightways PLC
Global Freightways PLC is a cross-border logistics and shipping multinational. You are the audit senior for the year ended 31 March 20X7. The company has complex revenue recognition policies due to shipments spanning multiple accounting periods. Furthermore, they hold significant foreign currency bank accounts. Global Freightways relies heavily on a bespoke, automated IT system called 'Track-It' to record shipments, calculate freight charges, and generate invoices automatically based on weight and distance.

QUESTION:
At the end of the audit, you request written representations from management. According to ISA 580 (Written Representations), which of the following statements regarding written representations is TRUE?

Answer options:

A.

Written representations can be used as a substitute for other audit evidence if management is considered highly trustworthy.

B.

Written representations provide necessary audit evidence but do not provide sufficient appropriate audit evidence on their own about any of the matters with which they deal.

C.

If management refuses to provide a requested written representation, the auditor must immediately resign from the engagement.

D.

Written representations must be dated after the date of the auditor's report.

How to approach this question

Recall the limitations of written representations. They are a form of evidence, but they are internally generated by management and therefore weak on their own.

Full Answer

B.Written representations provide necessary audit evidence but do not provide sufficient appropriate audit evidence on their own about any of the matters with which they deal.✓ Correct
ISA 580 states that while written representations provide necessary audit evidence, they do not provide sufficient appropriate audit evidence on their own about any of the matters with which they deal. The auditor must still obtain corroborating evidence.

Common mistakes

Believing that a management representation letter is a 'get out of jail free' card that replaces the need for substantive testing.
14All questions16

Practice the full ACCA AA — Audit and Assurance Practice Exam 6

18 questions · hints · full answers · grading

Sign up freeTake the exam

More questions from this exam

Q01CASE SCENARIO: AquaPure Utilities Co AquaPure Utilities Co is a recently privatized water utility...EasyQ02CASE SCENARIO: AquaPure Utilities Co AquaPure Utilities Co is a recently privatized water utility...MediumQ03CASE SCENARIO: AquaPure Utilities Co AquaPure Utilities Co is a recently privatized water utility...MediumQ04CASE SCENARIO: AquaPure Utilities Co AquaPure Utilities Co is a recently privatized water utility...MediumQ05CASE SCENARIO: AquaPure Utilities Co AquaPure Utilities Co is a recently privatized water utility...Easy
View all 18 questions →