Which of the following statements is correct?
A)A letter of representation is documentation of management's acceptance of responsibility for the financial statements and is deemed to be reliable evidence.
B)A letter of representation is not deemed to be reliable evidence because of the potential incompetence of management.
C)A letter of representation is not deemed to be reliable evidence because of the lack of independence of the preparers.
D)A letter of representation is documentation of the CPA's acceptance of responsibility for the audit of the financial statement and is deemed to be reliable.

Question

Quizplus · Accepted Answer

A letter of representation is not deemed to be reliable evidence because it is prepared by management, who lack independence. It is not documentation of the CPA's acceptance of responsibility for the audit nor is it evidence of management's acceptance of responsibility for the financial statements. Therefore, options A and D are incorrect. Option B is also incorrect because it implies that the potential incompetence of management automatically makes the letter of representation unreliable, which is not always the case.

Which of the Following Statements Is Correct