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 it is a written statement from a nonindependent source.
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 a written statement from management, a nonindependent source. While it is an important part of the audit evidence, it is not considered to be reliable evidence because it is a self-serving statement that cannot be corroborated through external sources. However, it is still an important part of the audit process as it helps to communicate responsibilities and confirm management's understanding of the financial statements.

Which of the Following Statements Is Correct