The international audit standards board has revised rules which will compel management to provide auditors with a clear written statement that they have provided auditors with all the information they need.
ISA 580, which caused an uproar among UK companies last year when it was proposed, has now been revised by the US-based International Auditing and Assurance Standards Board.
The rules - requiring the auditor to request that management provide written representations detailing that it had fulfilled its duties relating to the preparation and presentation of the company's financial statements and that it has provided the auditor with all relevant information - have not been changed from their initial proposal last year.
According to the IAASB, managers mus also confirm in their statements whether all transactions have been recorded and reflected in the statements, WebCPA.com reported.
The standard also provides recourse for an auditor, in cases in which written statements are either not provided or unreliable.
However it the rules are also clear that while such written representations are necessary, they do not provide sufficient audit evidence on their own and do not affect the nature or extent of other audit evidence that the auditor obtains about the fulfillment of management's responsibilities, or about specific assertions.
'The aim of the new requirements is to enhance the quality and appropriateness of written representations sought by the auditor by a focus on what is really necessary and, in particular, to deal with concerns that auditors may over-rely on representations at the expense of other evidence,' said IAASB Chairman John Kellas.
The standard will be effective for audits of financial statements for periods beginning on or after 15 December, 2009.
Further reading:
UK body rejects contentious letters standard
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