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Essay / Research Paper Abstract
This 3-page paper examines the management representation letter on this particular statement, and determines its importance. Bibliography lists one source.
Page Count:
3 pages (~225 words per page)
File: D0_MTsas85exp.rtf
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Unformatted sample text from the term paper:
well explore the make-up of the letter and determine if 1) it actually provides comfort to the auditor and 2) if not, why its important.
In its most basic form, SAS 85 was formulated in reaction for the need for better communication between a corporations auditor, management and audit committee (Green and
Reinstein, 2006). It was believed that while more communications standards might not have prevented fiascos such as Enron in 2001, more information about the risks of off-balance sheet debt could
have alerted financial statement users and protected them (Green and Reinstein, 2006). It could also have helped capital suppliers make better informed decisions, potentially limiting their losses (Green and Reinstein,
2006). The SAS suggests that changes in audit standards mean direct communication between the audit committee and financial report users such as
stockholders) (Green and Reinstein, 2006). As mentioned in this papers introduction, one of the main points of SAS 85 is the management
representation letter. Such letters are there to communicate, document and confirm corporate managements oral discussions with and representations made to the companys auditor (Green and Reinstein, 2006). The management representation
letter also confirms managements responsibility for the financial statements, while encouraging tailoring the communication to the clients business (Green and Reinstein, 2006).
Additionally, the letters document communications between management and auditors during the audit, and SAS 85 specifies that auditors are responsible for investigating questionable representations that might contradict evidence obtained and
collected during the audit (Green and Reinstein, 2006). But SAS 85s management representation letter is more than simply a rubber stamp. Its
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