Management representations SAS

SAS no. 19 Expires With No Fuss

T he American Institute of CPAs auditing standards board approved Statement on Auditing Standards no. 85, Management Representations, to supersede the 20-year-old SAS no. 19, Client Representations. The ASB had received about 30 comment letters on the exposure draft, virtually none of which raised any major issues, according to James S. Gerson, chairman of the ASB management representations task force. In the end, we made no major changes to the ED, he told the Journal.

"We did, however, emphasize what auditors should do if they do not get a representation letter from management, said Gerson. The ED had said auditors in that case would not give an unqualified opinion. The final statement says normally the auditor should disclaim an opinion although the option for a qualified opinion remains. Basically, we introduced a bias toward disclaiming. None of the comment letters objected to the EDs examples of additional representations in an appendix; these differed significantly from guidance in SAS no. 19. (See ED to Update Management Representations , JofA, July97.) This appendix remains in the final statement. Another important change—the requirement in paragraph 6(b) for specific representations on managements belief that the financial statements are fairly presented in conformity with generally accepted accounting principles—did not receive any real objections during the exposure period either and also remains in the final statement.

SAS no. 85 is effective for periods ending on or after June 30, 1998; earlier application is permissible. To order, call the AICPA order department at 800-862-4272.


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