Manifestaciones escritas o carta de representación obtenida de una auditoría de EF, según NIA 580

Rubelsi Valiente

16 Jan 202407:11

Summary

TLDRThe video script discusses the importance of the written representation letter or management letter in financial statement audits, as per the NIA 580 standard. It emphasizes the need for auditors to obtain this letter from management and, if applicable, from corporate governance bodies, to ensure the accuracy and integrity of financial statements. The letter should reflect the management's responsibility for financial preparation, internal control systems, fraud monitoring, and tax policy. The script also advises on the timing of obtaining this letter, ideally close to the auditor's report date, and the consequences of not obtaining it, which may lead to a qualified opinion or abstention from expressing an opinion due to significant limitations.

Takeaways

📝 The script discusses the NIA 580 standard, which pertains to written representations or letters of representation obtained in relation to an audit of financial statements.
🔔 It emphasizes the importance of subscribing to the channel and sharing content for broader access to useful information.
📑 The representation letter or written representations are documents related to financial statement audits, where the auditor must perform procedures to obtain these statements from management and, if applicable, those in charge of corporate governance.
📝 The letter should be requested from top management and, if a corporate governance body exists, from them as well, to ensure it reflects the auditor's findings.
👤 In the letter, management is expected to affirm their responsibility for the preparation and presentation of financial statements, the design and operational effectiveness of internal control systems, monitoring for fraud, and maintaining tax policies to avoid inaccuracies.
📋 The auditor should ensure that the procedures performed align with the representations made in the letter, confirming congruence between management's statements and the auditor's findings.
📅 The appropriate time to obtain the representation letter is as close as possible to the date of the auditor's report, but not later, to maintain the integrity and relevance of the audit evidence.
🚫 If the representation letter is not obtained, the auditor must consider the implications as per NIA 580 and NIA 75, potentially qualifying their opinion or abstaining from expressing an opinion if the limitation is significant.
🖋 The letter should be signed by individuals involved in the preparation of financial statements, including the chief accountant, financial manager, and those responsible for monitoring financial statements, as well as representatives from the board of directors or corporate governance if applicable.
🏢 The representation letter is typically provided on the company's letterhead and is given to the auditor towards the end of the audit process.
📈 The letter serves as a formal document where the administration acknowledges the scope of the audit, their responsibilities, and the possibility of other audits with different scopes, and is documented as part of the audit evidence.

Q & A

What is the main topic of the video script?
-The main topic of the video script is the discussion of the NIA 580 standard, which refers to written representations or letters of representation obtained in relation to an audit of financial statements.
What does NIA 580 stand for?
-NIA 580 is a standard that guides auditors on how to obtain written representations or affirmations from management and, when applicable, those charged with governance regarding the financial statements.
Who should provide the written representations or affirmations according to NIA 580?
-According to NIA 580, the written representations should be provided by the management and, if there is a corporate governance body, by those charged with governance.
What are the responsibilities that should be acknowledged in the written representations?
-In the written representations, the management should acknowledge their responsibility for the preparation and presentation of the financial statements, the design and operational effectiveness of the internal control system, monitoring for fraud, and designing and maintaining tax policies to ensure the accuracy of the financial statements.
What is the purpose of obtaining the written representations?
-The purpose of obtaining the written representations is to ensure that the auditors' procedures are congruent with the management's assertions and to gather evidence that supports the financial statements being audited.
Can the auditor request a specific letter for an issue that arose during the period?
-Yes, the auditor can request a specific letter for an issue that arose during the period if they consider it necessary, in addition to the standard written representations.
What is the appropriate timing for obtaining the written representations according to NIA 580?
-According to paragraph 14 of NIA 580, the written representations should be obtained as close as possible to the date of the auditor's report, but not later than the date of the report.
What happens if the auditor does not obtain the written representations?
-If the auditor does not obtain the written representations, NIA 580, specifically paragraph 19, suggests considering the effect on the audit opinion, and paragraph 20 allows the auditor to refrain from expressing an opinion if the limitation is significant.
Who should sign the written representations?
-The written representations should be signed by those involved in the preparation of the financial statements, including the chief financial officer, financial manager, and any relevant executives or members of the corporate governance body if it exists.
What is the general format of the written representations?
-The written representations are generally a letter on the company's letterhead, signed by the executives, acknowledging their awareness of the audit scope, their responsibilities, and any other concurrent audits with different focuses.
Why is the written representations letter important for the auditor?
-The written representations letter is important for the auditor as it serves as part of the audit evidence, and in some cases, it may be the only document that provides evidence of the management's assertions.

Outlines

00:00

📜 Introduction to ISA 580 and Written Representations

The video script begins with a warm welcome and an introduction to the topic of ISA 580, which focuses on written representations or a representation letter related to financial statements. It emphasizes the importance of obtaining this document as part of an audit process. The speaker invites viewers to subscribe to the channel for direct information and encourages sharing the content. The script explains that the representation letter is obtained from management and, if applicable, from those in charge of corporate governance. It outlines what is expected to be included in the letter, such as management's responsibility for the preparation and presentation of financial statements, the design and operational effectiveness of internal control systems, monitoring for fraud, and the design and maintenance of tax policies to ensure accuracy in financial reporting. The video also mentions that the date for obtaining the representation letter should be as close as possible to the date of the auditor's report, but not later.

05:01

🖋 Signatories and Purpose of the Representation Letter

This paragraph delves into who should sign the representation letter, which includes those involved in the preparation of financial statements, such as the chief accountant and financial manager. It also mentions that if there is a board of directors or corporate governance, the letter should be signed by the relevant executives or legal representatives. The representation letter is described as a formal document provided by the company's management, often on letterhead, and signed by executives to acknowledge their awareness of the audit scope, their responsibilities, and the existence of different types of audits with varying scopes. The letter serves as part of the audit evidence and should be consistent with the evidence gathered during the audit process, fulfilling the requirements of International Standards on Auditing.

Mindmap

Keywords

💡Audit

An audit refers to the systematic review and evaluation of an organization's financial statements, management, and operations. In the context of the video, the term is central to understanding the process of obtaining written representations, which are crucial for validating the accuracy and integrity of financial statements. The script mentions that the auditor must perform procedures to obtain a representation letter from management as part of the audit process.

💡Representation Letter

A representation letter is a formal document where the management of a company confirms certain statements and representations to the auditors. It is a key component in the audit process, as it provides written evidence of management's awareness and responsibilities regarding the financial statements. The video script emphasizes the importance of obtaining this letter as close as possible to the date of the auditor's report.

💡Financial Statements

Financial statements are formal records of a company's financial activities, including balance sheets, income statements, and cash flow statements. They are the primary subject of an audit, as they provide a snapshot of the company's financial health. The script discusses how the representation letter relates to the accuracy and reflection of these statements in the audit process.

💡Management Assertions

Management assertions are the claims made by a company's management regarding the accuracy and completeness of the financial statements. They are a fundamental part of the representation letter, where management confirms their responsibility for the preparation and presentation of the financial statements. The script highlights the importance of these assertions being consistent with the auditor's findings.

💡Internal Control System

An internal control system is a set of procedures and processes designed to ensure the accuracy of financial reporting, compliance with laws, and the prevention of fraud. The script mentions that management is responsible for the design, implementation, and operational effectiveness of such a system, which is a critical aspect of the audit.

💡Fraud Monitoring

Fraud monitoring involves the continuous oversight to detect and prevent fraudulent activities within an organization. The video script indicates that management is responsible for monitoring to ensure that there is no fraud, which is reflected in the financial statements and is a key part of the representation letter.

💡Tax Policy

A tax policy is a set of guidelines and strategies that a company follows to manage its tax affairs. The script suggests that management is responsible for designing and maintaining a tax policy to ensure that the financial statements do not contain inaccuracies related to tax matters, which is part of the responsibilities outlined in the representation letter.

💡Auditor's Report

The auditor's report is the formal conclusion of an audit, where the auditor expresses an opinion on the fairness and accuracy of the financial statements. The script discusses the timing of obtaining the representation letter in relation to the date of the auditor's report, emphasizing that it should be as close as possible to the report's date.

💡Corporate Governance

Corporate governance refers to the system of rules, practices, and processes by which a firm is directed and controlled. The script mentions that if there is a corporate governance structure in place, such as a board of directors, they may also be involved in signing the representation letter, indicating their involvement in the financial reporting process.

💡Written Assertions

Written assertions are the documented statements made by management that are used as evidence during an audit. The video script explains that the auditor expects management to make written assertions in the representation letter about their responsibilities and the accuracy of the financial statements.

💡Audit Evidence

Audit evidence consists of all the information used by the auditor in arriving at the audit opinion. The script describes the representation letter as a form of audit evidence, which should be consistent with the other findings and procedures conducted by the auditor during the audit process.

Highlights

Introduction to the NIA 580 and its relation to written representations or representation letters in financial statement audits.

Invitation to subscribe to the channel and the importance of sharing content for wider dissemination of information.

Explanation of the auditor's responsibility to obtain written representations from management and those charged with governance.

Details on what is requested in the representation letter, including the management's responsibility for financial statements and internal control systems.

Emphasis on the congruence between the auditor's procedures and the representations made by management in the letter.

The expectation that management will acknowledge their responsibility for the preparation and presentation of financial statements.

The requirement for management to confirm the design, implementation, and operational effectiveness of internal control systems.

The importance of management's responsibility to monitor for fraud and ensure accurate financial statement representation.

Discussion on the responsibility for designing and maintaining tax policies to avoid inaccuracies in financial statements.

Mention of Appendix 1 as a model for the representation letter, with the need for customization based on audit requirements.

The option to request specific representation letters for issues arising during the audit period.

The appropriate timing for obtaining the representation letter, which should be as close as possible to the audit report date.

Consequences of not obtaining the representation letter and its impact on the auditor's opinion as per NIA 580 and NIA 75.

Guidance on how to handle situations where management refuses to provide the representation letter.

Identification of the individuals who should sign the representation letter, including those involved in financial statement preparation and oversight.

The role of the representation letter as a formal document signed by executives, acknowledging their awareness of the audit scope and responsibilities.

The importance of the representation letter as part of the audit evidence, ensuring congruence with the evidence obtained during the audit.

Conclusion and a reminder of the value of the representation letter in fulfilling the requirements of International Auditing Standards.