Dating Review Representation Letters

According to SSARS 19, representation letters must be dated on the same date as the review report. Also, the review report should be dated on the date the review engagement is complete–the date all work and technical reviews are complete.

So how do I make the stars align? How do I get the client to sign the representation letter on the same date that I complete the review engagement? Or is there another way to solve this problem? Let’s see.

Typical Scenario

It’s February 3rd and you expect to complete your review engagement on the 7th–the date the partner will review the file and the report. So you have the representation letter typed (with a February 7, 2014 date) and sent to the client, but the client leaves town unexpectedly. It’s the 12th before the owner can actually sign the representation letter. Argh!

So how can we solve this dating problem?

Use an “as of” date.

Include in your representation letter language such as the following:

We confirm, to the best of our knowledge and belief, as of February 7, 2014, the following representations made to you during your review.

As long as the signature date (the date at the top of the letter) does not precede the “as of” date (e.g., February 7, 2014, in our example), you are okay. Using our example scenario, the “as of” date and the date of the review report is February 7, 2014; the date of the letter and date the client signs the letter is February 12, 2014.

Must I be in physical receipt of the representation letter before I date the review report?

No.

SSARS 19 (AR 90.24) states:

The accountant need not be in physical receipt of the management representation letter as of the date of the accountant’s review report, provided that management has acknowledged that they will sign the representation letter without modification.

Must I be in physical receipt of the representation letter prior to the issuance of the review report?

Yes.

SSARS 19 (AR 90.24) states that the representation letter must be “received prior to the release of the report.” This issue is often solved with an exchange–the CPA hands the report to the client and the client hands the representation letter to the CPA, or the representation letter is emailed to the CPA and the CPA emails the report to the client.

Years to Specify in Engagement Letters and Representation Letters (When Comparative Financial Statements are to be Issued)

For engagements that involve comparative financial statements, do you ever wonder what years you should specify in an audit, review or compilation engagement letter (or representation letter)? Should you specify just the current year or both the current year and the prior year?

Engagement Letters

If my client has comparative financial statements, what year or years should be specified in an audit, review, or compilation engagement letter?

Just the current year (unless you are engaged to audit or perform a review or compilation for multiple years).

For example, let’s say your client is to issue comparative statements for December 31, 2013 and 2014 and you are creating an engagement letter for the 2014 audit; you will just specify the 2014 year in the engagement letter (unless you are engaged to audit 2013 and 2014 at the same time — which is unusual). The same is true for compilation and review engagement letters.

Representation Letters

If my client has comparative financial statements, what year or years should be specified in the audit or review representation letter?

Both years.

For example, let’s say your client is to issue comparative statements for December 31, 2013 and 2014 and you are creating the representation letter for the 2014 audit; you will specify 2013 and 2014 in the representation letter; this is true even if management changes in the two year period (for example, one CFO in the first year and another CFO in the second year).

The professional standards that provide guidance about this issue are as follows:

Reviews – According to SSARS No. 19 (AR 90.22), representation letters should include all periods covered by the accountant’s report.

Audits
– According to AU-C 580, Written Representations, representation letters should include all periods covered by the auditor’s report.

Data Collection Form Filing Deadline Extended to Feb. 28, 2014

The Federal Audit Clearinghouse has the following “important notice” on its website as of January 2, 2014:

The Form SF-SAC 2013 Data Collection is scheduled for release January 7, 2014. See the November 19, 2013 Federal Register Notice. The Office of Management and Budget (OMB) has granted an extension until February 28, 2014 for all 2013 forms due on or before February 28, 2014. The extension is automatic and there is no approval required. Auditees with findings are encouraged to submit as soon as the 2013 Form becomes available on January 7, 2014.

I’m not sure how many times the deadline has been extended; at this point, I’ve lost count. Hopefully this date sticks.