During the final stage of the first audit of Nairobi National Bank Ltd. You request the client to provide you with a letter of representation. The Client reads representations you are requesting and refuses to furnish the letter. The client states its position to be as follows:―You are asking us to tell you all manner of things which we appointed you to find out. You are requesting us to say such things as ‗all the transactions undertaken by the bank have been properly reflected in the accounting records‘and yet we pay you to carry out the audit. You should know whether these statements are true or not .Required: Explain to the client the purpose of the letter of representation

A letter of representation is written by the directors of a company to the auditors of that company normally towards the end of an audit before the auditor signs his audit report. The letter confirms verbal representations made by the directors during the audit as well as providing audit evidence on areas where other audit evidence is not available e.g. where a company settles a legal claim out of court, the directors would then provide representations to the auditor that they know of no other claims on the company in this area.

In addition the letter of representation will serve the following functions:-

  •  It reminds the directors of their duties concerning the financial statements. In the letter the directors acknowledge their responsibility for their preparation of the financial statements event though the auditor may have assisted in this area.
  •  It provides the auditor with a further source of audit evidence to corroborate other information obtained.



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