AICPA CPA-Auditing Exam - Topic 3 Question 30 Discussion

Choice 'c' is correct. The written representation obtained by the auditor from management will ordinarily include information regarding any violations or possible violations of laws or regulations whose effects should be considered for disclosure in the financial statements or as a basis for recording a loss contingency.

Choice 'a' is incorrect. A client engagement letter is used to document the understanding between the client and the auditor. The letter is generally sent from the auditor to the client, although the client may be requested to sign it. The statement, 'There are no violations or possible violations of laws or regulations...' should come from management. It would not be appropriate to include this in an engagement letter, which is often sent before the year has even ended.

Choice 'b' is incorrect. An auditor would prepare a report on compliance with laws and regulations. The statement, 'There are no violations or possible violations of laws or regulations...' should come from management.

Choice 'd' is incorrect. An auditor would prepare an attestation report on internal control. The statement, 'There are no violations or possible violations of laws or regulations...' should come from management.