ISA 580 (REVISED AND REDRAFTED) MANAGEMENT REPRESENTATIONS
ISA 580 (revised and redrafted) deals with the auditors’ responsibilities in obtaining written representations from management on matters which are material to the financial statements when other sufficient appropriate audit evidence cannot reasonably be expected to exist.
Written representations can sometimes be necessary but on their own they cannot provide sufficient appropriate audit evidence. Written representations shall also not be used as an excuse for auditors not performing other audit procedures that could reasonably be expected to produce sufficient appropriate audit evidence concerning material items in the financial statements. Indeed, where alternative audit procedures cannot provide the auditor with suf-ficient appropriate audit evidence, this could well give rise to the auditor expressing a qualified opinion due to a limitation on the scope of their audit work. Written representations, therefore, are not a substitute for alternative audit procedures. Consider the following illustration.
An entity uses the revaluation model for measuring its freehold buildings. In 2008 the building had a carrying amount of $75,000. In 2009, management have revalued the building to $175,000, resulting in a revaluation gain of $100,000. The auditors have sought representation from management concerning the revaluation and consider the representation by management as sufficient appropriate audit evidence. ...