When audit firms do an audit of historical financial statements, part of the audit usually consists of identifying operational problems and making recommendations that may benefit the audit client. The recommendations can be made orally but they are typically made by use of:
A) a client letter.
B) an engagement letter.
C) a management letter.
D) a letter of representation.

Question

Quizplus · Accepted Answer

Operational problems and recommendations are typically communicated through a management letter, which is a separate letter addressed to the audit client's management. The client letter is typically used to communicate the results of the audit and any significant findings. The engagement letter outlines the scope and terms of the audit engagement. A letter of representation is a letter from management to the auditor confirming certain representations made during the audit process. Therefore, the best choice for this question is C – a management letter.

When Audit Firms Do an Audit of Historical Financial Statements