Definition of representation letter

written confirmation from management to the auditor about the fairness of various financial statement elements. The purpose of the letter is to emphasize that the financial statements are management's representations, and thus management has the primary responsibility for their accuracy. Also, the letter provides supplementary audit evidence of an internal nature by giving formal management replies to auditor questions regarding matters that did not come to the auditor's attention in performing audit procedures. Some auditors request written representations of all financial statement items. All auditors require representations regarding receivables, inventories, plant and equipment, liabilities, and subsequent events. Frequently, all these representations are included in one letter. The letter is required at the completion of the audit fieldwork and prior to issuance of the financial statements with the auditor's opinion. Management acknowledges its responsibilities for running the company, the adequacy of f nancial policies employed, confirmat on of practices observed during the audit, and confirmation to the auditor that management has made full disclosure of all material activities and transactions in its financial records and statements.