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Management Reporting. For each of the following issue, classify them according to whether they will be (1) included in management representations if material, (2) Included in management representations regardless of materiality, or (3) not included in management representations.
a. Management acknowledgement of its responsibility for the fairness of the financial statements in conformity with accounting principles generally accepted in United States of America.
b. A list of pending or threatened litigation, claims, or assessments currently outstanding against the client
c. A description of recommendations that allow the client to improve the efficiency and effectiveness of its operations.
d. Availability of all financial records and related data.
e. Information related to the presentation and disclosure of items within the financial statement.
f. Disclosure of all significant deficiencies in internal control.
g. Information concerning fraud involving management and employees who have significant roles in internal control.
h. Auditor' judgment about the quality of the client's accounting principle.
i. Information about violations or possible violations of laws or regulations that should be considered for disclosure in the financial statements.
j. A statement that the financial statements are prepared according to US general accounting principl
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The solution provides a complete explanation explaining how each item listed should be reported in management's representations.
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a. Management acknowledgement of its responsibility for the fairness of the financial statements in conformity with accounting principles generally accepted in United States of America.
(2) This would be included by management regardless of materiality. The acknowledgement of managerial responsibility in conformity to GAAP is a basic part of every audit report, and is required by GAAP.
b. A list of pending or threatened litigation, claims, or assessments currently outstanding against the client.
(3) This would not be included at all, until the contingency tests are met. The loss contingency would have to be determined to be classified as reasonably possible or probable for the loss contingencies to be reported.
c. A description of recommendations that allow the client ...
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