During the final stage of the first audit of Nairobi National Bank Ltd. You request theclient to provide you with a letter of representation. The Client reads representations you are requesting and refuses to furnish the letter. The client states its position to be as follows:-―You are asking us to tell you all manner of things which we appointed you to find out. You are requesting us to say such things as ‗all the transactions undertaken by the bank have been properly reflected in the accounting records‘and yet we pay you to carry out the audit. You should know whether these statements are true or not; Required: Describe the nature of the content of a letter of representation. Your answer should be illustrated with specific examples of items which may appear in a letter of representation – Business and Technical Learning Resources

Example of a letter of representation

Set out below is an example of a letter of representation, which relates to matters, which are material to financial statements and to circumstances where the auditor cannot obtain independent corroborative evidence and could not reasonably expect it to be available. It is not intended to be a standard letter because representations by management can be expected to vary not only from one enterprise to another but also from one year to another in the case of the same client.

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During the final stage of the first audit of Nairobi National Bank Ltd. You request the client to provide you with a letter of representation. The Client reads representations you are requesting and refuses to furnish the letter. The client states its position to be as follows:―You are asking us to tell you all manner of things which we appointed you to find out. You are requesting us to say such things as ‗all the transactions undertaken by the bank have been properly reflected in the accounting records‘and yet we pay you to carry out the audit. You should know whether these statements are true or not .Required: Explain to the client the purpose of the letter of representation
What is the purpose of a letter of representation?
Identify any four contents of an audit engagement letter
Explain the reliability of bank statements as audit evidence
Explain the auditor‘s planning process when planning for an audit of a new client
Explain the purpose and principal contents of a letter of engagement
Write briefly explanatory notes on the following types of audit: Statutory audit, Private audit, Balance sheet audit and Management audit;
Distinguish between a procedural audit and a balance sheet audit
Define the term audit programme
What is an audit?
How does audit planning assist in the conduct of an audit?
Write brief explanatory notes on the following audit terms: Vouching audit;
List five limitations of an audit
List two advantages and two disadvantages of using standardised audit programmes during audit assignments
Briefly explain the nature and purpose of a letter of engagement and under what circumstances would it be appropriate for an external auditor to issue a new letter of engagement?
In the course of the audit of ABC Stationers Ltd. for the year ended 30 June 2001, you have noted and recorded in the audit working papers, the following evidential matters: 1. Flowcharts of the company‘s payroll prepared by your audit assistant backed up by tests of controls. 2. An oral statement by the production director that the expected working life of plant acquired during the year is ten years. 3. A letter to the managing director from the company‘s bank manager indicating that the bank intends to extend overdraft facilities for a period of one year. 4. A list of items of inventory counted by a member of your audit team during observation of the company‘s annual stock count. 5. A letter from a customer to your firm in reply to a confirmation request indicating agreement with the balance recorded in the books of ABC Stationers Ltd. Required: With respect to each matter listed above, explain its relevance to the overall audit objective of forming an opinion and reporting on the financial statements and Explain your judgment on the reliability of the audit evidence obtained in five ways listed above
Explain the computer assisted audit techniques listed below: Embedded audit facilities and Integrated test facilities
Distinguish between internal audit and internal check
Working papers provide the audit evidence. They can be categorized into: Auditors‘ prepared working papers, Client‘s schedules used as working papers, Audit programmes. Working papers are then organized into files usually referred to as either current files of permanent files;What details should each client schedule used as a working paper indicate?
Identify four factors that should be taken into consideration by an audit firm when allocating staff to audit assignments
What are computer assisted audit techniques (CAATs)?
List six contents of an unqualified audit report
What is an audit peer review? and state and briefly explain the objectives of an audit peer review
Define and explain the meaning of an audit programme
Briefly explain the types of audit opinion that would normally arise from a limitation in the scope of audit
You are in charge of a group of audit trainees who have just been employed by your audit firm. This is the audit trainees‘ first assignment and they are aware that they are supposed to prepare audit working papers but they do not know how to do so or what information they should include in the audit working paper.‘Required:Provide the audit trainees with guidelines on how they should prepare audit working papers
Cash in hand and cash at bank are commonly referred to as liquid assets. Because of this liquidity, these assets represent the most vulnerable of all the assets of an entity. You have recently been employed by Korir and Associates (Certified Public– Accountants) as an audit assistant. During your first audit assignment at Viwanda Ltd you have been allocated the audit of cash in hand and cash at bank.Required; State and explain any the audit procedures you would undertake in order to determine whether or not there has been any misappropriation of cash. and Explain any five controls over cash you would expect to be instituted by a business entity in order to minimize cases of embezzlement of cash
Duties of a bank to its customers
Your audit firm, Kimani and Associates has been contracted by the government to audit the procurement system followed by the government. Required; Outline the audit procedures an audit firm should follow in the verification of a manufacturing company‘s liabilities
You are in charge of a group of audit trainees who have just been employed by your audit firm. This is the audit trainees‘ first assignment and they are aware that they are supposed to prepare audit working papers but they do not know how to do so or what information they should include in the audit working paper.‘Required: Identify the type of information that the audit trainees should include in the audit working papers
Explain the importance of preparing regular bank reconciliation statements
What is the purpose of an audit report ?
You are in charge of a group of audit trainees who have just been employed by your audit firm. This is the audit trainees‘first assignment and they are aware that they are supposed to prepare audit working papers but they do not know how to do so or what information they should include in the audit working paper. ‘Required: Explain the importance of audit working papers
You are in charge of a group of audit trainees who have just been employed by your audit firm. This is the audit trainees‘ first assignment and they are aware that they are supposed to prepare audit working papers but they do not know how to do so or what information they should include in the audit working paper.‘Required: List any four advantages of standardized audit working papers
Explain the importance of audit to a limited liability company
List and briefly explain five disadvantages of an interim audit
Outline the basic elements of an unqualified audit report
What specific actions can an individual auditor or audit firm take to minimize liability arising from audit risk?
Explain the nature and purpose of a post-audit review
The auditor should obtain sufficient and appropriate audit evidence to be able to draw reasonable conclusions on which to base the audit opinion. Identify and briefly explain any three procedures for obtaining audit evidence

Example of a letter of representation

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