AICPA Exam CPA-Auditing Topic 3 Question 43 Discussion

Choice 'd' is correct. The auditor is not required to communicate to those charged with governance the degree of reliance placed on the management representation letter.

Choice 'a' is incorrect. Unless all those charged with governance are also involved with managing the entity, the auditor should inform those charged with governance about adjustments arising from the audit, regardless of whether or not management recorded them.

Choice 'b' is incorrect. The auditor should communicate qualitative aspects of the process used by management in formulating sensitive accounting estimates, which would likely include discussion of the basis for the auditor's conclusions regarding the reasonableness of those estimates.

Choice 'c' is incorrect. The auditor should communicate the level of responsibility that he/she is assuming under GAAS.