Management representation letter
In one sentenceA letter management signs at the end of the audit confirming its responsibility for the statements and that it has given the auditor all the records and information required.
Simply put
Some matters only management knows: are there lawsuits? Have liabilities been hidden? Did anything happen after year end? That is why the auditor asks for a written representation about them.
The representation is supporting evidence that does not replace examination, and management's refusal to sign it may prevent the auditor from expressing an opinion.
Example
Before issuing the audit report on a factory, the auditor sends a representation letter signed by the general manager and the finance manager, confirming that all transactions have been recorded, that there are no undisclosed lawsuits, and that they have reported significant subsequent events.
Don't confuse it with
Engagement letterThe engagement letter sets the terms of the work at its start, while the representations are signed at its end.