Written representations and the auditor’s expert: ISA 580 and ISA 620

Two kinds of evidence come from people other than the auditor. One is what management says, and the auditor asks for it in writing. The other is what a specialist says, when the auditor lacks the skill to judge a matter alone.

This topic covers the letter of representation under International Standard on Auditing (ISA) 580, the use of an auditor’s expert under ISA 620, and the related rules in ISA 500 on an expert used by management.

Examiners ask for the contents of a representation letter, what to do if management refuses, and the factors in deciding whether to use an expert and in judging the expert’s work. In May 2026 the issues in assessing the objectivity of an expert on a bank audit were worth 5 marks. The list is short and each item is easy to apply to a scenario.

Written representations: ISA 580

ISA 580 defines a written representation as a written statement by management provided to confirm certain matters or to support other audit evidence. The auditor’s objectives are to:

1. obtain written representations from management that it has fulfilled its responsibilities for the financial statements and for the audit;
2. obtain other written representations as appropriate to support other audit evidence; and
3. respond appropriately to representations provided, or to a refusal to provide those requested.

The auditor obtains them in a letter of representation addressed to the auditor. They may be an important source of evidence.

Representations as audit evidence

Management makes many representations during an audit, some unprompted and some in answer to the auditor’s questions. Oral statements are noted on the file, but verbal evidence is weak. To improve its quality, the auditor asks for significant discussions to be confirmed in writing. They are likely to be needed:

• to support the auditor’s understanding of management’s intention or judgement, for example future plans or the net realisable value of inventory; and
• for the completeness of a specific item, for example that all liabilities have been provided for.

Written representations are necessary evidence but not sufficient appropriate evidence on their own. If a representation is contradicted by other evidence, the auditor must:

1. consider whether the risk assessment of that area is still right;
2. consider whether more procedures are needed; and
3. if concerned about the integrity of management, document the concerns and consider withdrawing from the audit.

Representations about management’s responsibilities

Management acknowledges that:

• it has fulfilled its responsibility for the preparation and fair presentation of the financial statements under the applicable framework;
• it has given the auditor all relevant information; and
• all transactions have been recorded and reflected in the financial statements.

The letter of representation

The letter is:

• usually drafted by the auditor, who knows the areas needing representations;
• addressed to the auditor; and
• dated as near as practicable to, but not after, the date of the audit report.

The contents below are the minimum, to which specific representations may be added.

If management refuses

If management refuses to give requested representations, the auditor must:

1. discuss the matter with management;
2. re-evaluate the integrity of management and reconsider the effect on other representations and audit evidence; and
3. take appropriate action, including considering the effect on the audit report.

Background: ISA 580 says that if the auditor concludes management’s integrity is so doubtful that the representations are unreliable, or if management does not give the representations on its responsibilities, the auditor disclaims an opinion. A refusal on its responsibilities for the statements or for information given is the most serious case.

The auditor’s expert: ISA 620

The auditor may use the work of an expert to provide knowledge the firm does not have. ISA 620 Using the work of an auditor’s expert gives examples where experts may be needed:

• legal opinions;
• specialist valuations, such as property or pension liabilities; and
• analysis of complex or unusual tax compliance issues.

The ISA covers the auditor’s expert, who is engaged by the auditor and not by the entity. The objective is to let the auditor decide whether to use the work of an expert and judge whether that work is adequate.

Deciding whether an expert is needed

An expert charges a fee, so the use of one is judged on cost against benefit. The auditor considers:

• the nature, significance and complexity of the matter;
• the risk of material misstatement; and
• the availability of alternative sources of audit evidence.

Using and evaluating the expert’s work

The auditor must:

1. understand the expert’s field enough to decide the nature, scope and objectives of the work and to judge its adequacy;
2. agree the terms of engagement, covering the nature, scope and objectives of the work, the respective responsibilities of expert and auditor, the form of the report and confidentiality; and
3. evaluate the adequacy of the work, including the reasonableness of the conclusions, their consistency with other evidence, the reasonableness of the significant assumptions and methods, and the relevance, completeness and accuracy of the source data.

If the work is not adequate, the auditor agrees additional work with the expert or performs other suitable additional procedures.

Responsibility and the report

The auditor has sole responsibility for the opinion, and using an expert does not reduce it. The auditor does not mention the expert in the report unless law or regulation requires it. Even then, or where the report refers to the expert because it helps users understand a modified opinion, the report must say that the reference does not reduce the auditor’s responsibility. The expert’s work is evaluated like any other evidence.

Competence, capabilities and objectivity

The auditor may assess an expert’s competence, capabilities and objectivity by:

• personal experience of the expert’s earlier work;
• discussions with the expert;
• discussions with other auditors or others who know the expert’s work;
• knowledge of the expert’s qualifications, professional membership, licence or other external recognition; and
• published papers or books by the expert.

Background: ISA 620 allows an auditor’s expert to be internal, a partner or member of staff of the firm or a network firm, or external. The assessment of objectivity still applies, and an internal expert is covered by the firm’s quality management and ethical requirements.

An expert used by management

Sometimes the client, and not the auditor, uses an expert, for example for a property valuation. Where information used as evidence was prepared using the work of management’s expert, ISA 500 requires the auditor to evaluate the expert’s competence, capabilities and objectivity, to understand the expert’s work and to evaluate whether the report is appropriate evidence.

The objectivity of the expert is more of an issue when the client engaged the expert.

Issues in assessing objectivity

1. Whether the expert has a financial interest in the audit client, such as a shareholding.
2. Whether the expert has a personal relationship with a senior manager of the client.
3. Whether the fee paid was a fair commercial price.

Issues in judging whether the work is sufficient and appropriate evidence

1. Review the terms of engagement with the client: the objective and scope, and whether the expert knew the auditor might rely on the work.
2. Study the report and conclusions. Compare significant assumptions, such as those used in an asset valuation, with the auditor’s own understanding of the business.
3. Check the methods. For investment property, the method must be consistent with International Accounting Standard (IAS) 40.
4. Check the date of the valuation, which should be close to the year end so that it is current.

Further evidence on a valuation

If an expert has valued several properties for the client, the auditor may get more evidence by:

• inspecting some of the properties to see their condition;
• checking the cost of similar assets bought during the year;
• comparing the cost of assets bought in the year with the year-end valuation, which should be close unless values moved sharply;
• checking events after the reporting period, since a property sold after the year end should have fetched about its valuation;
• obtaining management’s representation that key assumptions are reasonable; and
• using an expert of the auditor’s own, which fair value accounting may require more often.

The rules in more depth

Why representations cannot stand alone

Management is the party being audited and has an interest in the answers. A statement from management proves what management says and not that it is true. It is useful for matters where only management knows the answer, such as intention, and as a record of responsibility. For anything that can be checked, other evidence is needed.

Why the letter is dated close to the report

The letter covers the whole period up to the report. If it were dated earlier, matters arising in between would be uncovered. It is not dated after the report because the auditor cannot sign a report before the representations are in hand.

Why refusal is serious

A manager who will not confirm that all information was provided, or that transactions are recorded, is saying something about the information itself. It makes the auditor doubt every other answer, so integrity is re-evaluated and the report may be affected.

Why the auditor keeps sole responsibility

The opinion is the auditor’s. An expert supplies knowledge, not the conclusion, so the auditor evaluates the expert’s work as with any evidence. Mentioning the expert in the report could suggest the responsibility is shared, so it is avoided unless the law requires.

Why objectivity matters most for management’s expert

An expert paid by the client, owning its shares or friendly with its managers may be pushed towards the answer management wants. The auditor looks for these ties, tests the assumptions independently and gets other evidence for the key figures.

Worked example: a valuation and a refusal

1. Objectivity. A 2% shareholding is a financial interest, a friendship with the finance director is a personal relationship, and an abnormally low fee raises questions about whether the valuer expected other benefits. These threaten objectivity.
2. The work. Review the terms of engagement, read the report and compare assumptions with the auditor’s knowledge, check that the method follows IAS 40, and note that a valuation six months old is not current.
3. More evidence. Inspect some properties, compare year-end values with recent purchase costs, check sales after the year end and, if doubts remain, engage the auditor’s own expert.
4. Refusal. Discuss it with the managing director and find out why. Re-evaluate management’s integrity and the reliability of other representations and evidence. Consider whether non-compliance exists that has not been disclosed, and whether it is material.
5. Effect on the report. If it is not resolved, consider the effect on the opinion, including a qualified opinion or disclaimer, and communicate with those charged with governance.

Conclusion. Treat the valuation with caution, corroborate it independently and take the refusal to represent seriously.

How to score full marks

• For the letter of representation, say who drafts it, to whom it is addressed and its date, then list the contents.
• Say that representations are not sufficient on their own. Give the three actions if they are contradicted.
• For refusal, give the three steps: discuss, re-evaluate integrity, consider the effect on the report.
• For objectivity of an expert, give financial interest, personal relationship and fee, then the work points: terms of engagement, report and assumptions, method and date.
• For ISA 620, give the objective, the need factors, the three duties and the sole responsibility rule.
• Apply each point to the facts. A shareholding, a friendship and a cheap fee each mean something.
• Time. Spend time in proportion to marks.

Common mistakes in the exam

• Treating the representation letter as enough evidence on its own.
• Dating the letter after the audit report.
• Confusing the auditor’s expert (ISA 620) with management’s expert (ISA 500).
• Saying that using an expert transfers responsibility for the opinion.
• Referring to the expert in the audit report without a legal requirement.
• Listing objectivity points without applying them to the scenario.
• Forgetting cost against benefit when deciding whether to use an expert.

Quick revision

• Written representation: a written statement by management confirming matters or supporting evidence. ISA 580.
• Letter: drafted by the auditor, addressed to the auditor, dated near but not after the report.
• Necessary, not sufficient. If contradicted: reassess risk, do more work, consider withdrawal.
• Refusal: discuss, re-evaluate integrity, consider the report.
• ISA 620 need: nature and complexity, risk of misstatement, alternative evidence, cost against benefit.
• Duties: understand the field, agree terms, evaluate the work. The auditor keeps sole responsibility.
• Objectivity: financial interest, personal relationship, fair fee. Work: terms, report and assumptions, method, valuation date.

Practice questions

These are original questions written in the style of the Institute of Chartered Accountants of Nigeria (ICAN) exam. Try each one before you open the answer. Full model answers follow the written questions.

Recall check: multiple choice

The real ICAN paper has no multiple-choice section. These questions are for quick recall. The written questions that follow are closer to the exam.

Written questions

Model answers

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