Page 300 - Auditing Standards

As of December 15, 2017

.48 AS 2805, Management Representations, requires that the independent auditor obtain written
representations from management as a part of an audit of financial statements performed in accordance with
the standards of the PCAOB and provides guidance concerning the representations to be obtained. The

auditor ordinarily should obtain written representations from management regarding the reasonableness of
significant assumptions, including whether they appropriately reflect management's intent and ability to carry
out specific courses of action on behalf of the entity where relevant to the use of fair value measurements or

disclosures.

.49 Depending on the nature, materiality, and complexity of fair values, management representations
about fair value measurements and disclosures contained in the financial statements also may include

representations about:

The appropriateness of the measurement methods, including related assumptions, used by

management in determining fair value and the consistency in application of the methods.

The completeness and adequacy of disclosures related to fair values.

Whether subsequent events require adjustment to the fair value measurements and disclosures

included in the financial statements.

Communication With Audit Committees

.50 Paragraphs .12-.13 of AS 1301, Communications with Audit Committees, require the auditor to
communicate to the audit committee matters related to critical accounting estimates, which may include fair
value measurements.

Effective Date

.51 This section is effective for audits of financial statements for periods beginning on or after June 15,

2003. Earlier application of the provisions of this section is permitted.

Footnotes (AS 2502 - Auditing Fair Value Measurements and Disclosures):

1 Generally accepted accounting principles (GAAP) contain various definitions of fair value. However, all of

the definitions reflect the concepts in the definition that appears in Financial Accounting Standards Board
(FASB) Statement of Financial Accounting Concepts No. 7, Using Cash Flow Information and Present Value in
Accounting Measurements. For example, Governmental Accounting Standards Board Statement of
Governmental Accounting Standards No. 31, Accounting and Financial Reporting for Certain Investments and
for External Investment Pools, defines fair value as “the amount at which an investment could be exchanged in a
current transaction between willing parties, other than in a forced or liquidation sale.”

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