Auditing Body Toughens Standards for Management Statements

The International Auditing and Assurance Standards Board has revised the international standards requiring management to provide auditors with a clear written statement that auditors have received all the information they need.

International Standard on Auditing 580 (Revised and Redrafted), Written Representations, requires the auditor to request management to provide written representations that it has fulfilled its responsibility for the preparation and presentation of the financial statements, has provided the auditor with all the relevant information, and that all transactions have been recorded and are reflected in the financial statements.

ISA 580 includes requirements for appropriate action by the auditor when written representations are not provided by management or are considered to be unreliable. The ISA makes clear that, although written representations provide necessary audit evidence, they do not provide sufficient audit evidence on their own. Furthermore, the fact that management has provided written representations does not affect the nature or extent of other audit evidence that the auditor obtains about the fulfillment of management's responsibilities, or about specific assertions.

"The aim of the new requirements is to enhance the quality and appropriateness of written representations sought by the auditor by a focus on what is really necessary and, in particular, to deal with concerns that auditors may over-rely on representations at the expense of other evidence," said IAASB Chairman John Kellas (pictured) in a statement.

The IAASB also released ISA 560 (Redrafted), Subsequent Events, which clarifies the auditor's responsibilities relating to subsequent events in an audit of financial statements. Both standards are effective for audits of financial statements for periods beginning on or after Dec. 15, 2009.