Under ASA 580 and ASAE 3100, the auditor seeks written representations from the trustee regarding financial and compliance matters. These written representations are generally in the form of a representation letter which may confirm both verbal representations made during the course of the audit as well as other matters requiring written confirmation. The trustee representation letter is ordinarily obtained as primary audit evidence prior to the auditor’s report being issued.
In instances where the auditor’s contact with the trustee is limited, and may only be at the conclusion of the engagement, in the interest of having a more efficient audit approach the auditor may consider obtaining certain confirmations from the trustee at the planning stage of the engagement, for example, regarding the eligibility of the trustee, safe-guarding of assets and fraud.
With respect to the financial audit of a SMSF, under ASA 580, the auditor obtains written representations from the trustee, including that they:
- acknowledge responsibility for the selection of the applicable financial reporting framework and for the fair presentation of the financial report in accordance with the adopted applicable financial reporting framework;
- have approved the financial report;
- confirm specified matters material to the financial report, when other sufficient appropriate audit evidence cannot reasonably be expected to exist;
- acknowledge their responsibility for the design and implementation of internal control to prevent and detect error; and
- believe the effect of uncorrected misstatements aggregated by the auditor is immaterial, both individually and in aggregate, to the financial report.
The auditor may also seek representations under ASAE 3100, with respect to the compliance engagement, that the trustee:
- confirm specified matters material to the compliance engagement; and
- have conducted the affairs of the SMSF in compliance with the SISA, SISR and other relevant legislation throughout the period.
Upon receipt of a written representation, the auditor evaluates the representation for reasonableness against other audit evidence collected and the knowledge of the individual making the representation and, where possible, obtains corroborative evidence.
Representations by the trustee cannot replace other evidence the auditor could reasonably expect to be available. An inability to obtain sufficient appropriate evidence regarding a matter that has, or may have, a material effect on the financial report or evaluation or measurement of the subject matter, when such evidence would ordinarily be available, constitutes a limitation on the scope of the audit, even if a representation from the responsible party has been received on the matter. In such circumstances, ASA 705 and ASAE 3100 require the auditor to express a qualified opinion or a disclaimer of opinion.
An example Trustee representation letter which covers both the financial audit and compliance engagement is included as Appendix 2 of this Guidance Statement.