Page 427 - Auditing Standards

As of December 15, 2017
terms equivalent to those prevailing in an arm's-length transaction. 9

m. Guarantees, whether written or oral, under which the entity is contingently liable.

n. Significant estimates and material concentrations known to management that are required to be

disclosed in accordance with the AICPA's Statement of Position 94-6, Disclosure of Certain
Significant Risks and Uncertainties.

o. Violations or possible violations of laws or regulations whose effects should be considered for

disclosure in the financial statements or as a basis for recording a loss contingency. 10

p. Unasserted claims or assessments that the entity's lawyer has advised are probable of assertion and
must be disclosed in accordance with Financial Accounting Standards Board (FASB) Statement No.

5, Accounting for Contingencies [AC section C59]. 11

q. Other liabilities and gain or loss contingencies that are required to be accrued or disclosed by FASB
Statement No. 5 [AC section C59]. 12

r. Satisfactory title to assets, liens or encumbrances on assets, and assets pledged as collateral.

s. Compliance with aspects of contractual agreements that may affect the financial statements.

Subsequent Events

t. Information concerning subsequent events. 13

.07 The representation letter ordinarily should be tailored to include additional appropriate representations

from management relating to matters specific to the entity's business or industry. Examples of additional
representations that may be appropriate are provided in appendix B, "Additional Illustrative Representations"
[paragraph .17].

.08 Management's representations may be limited to matters that are considered either individually or
collectively material to the financial statements, provided management and the auditor have reached an
understanding on materiality for this purpose. Materiality may be different for different representations. A

discussion of materiality may be included explicitly in the representation letter, in either qualitative or
quantitative terms. Materiality considerations would not apply to those representations that are not directly
related to amounts included in the financial statements, for example, items (a), (c), (d), and (e) above. In

addition, because of the possible effects of fraud on other aspects of the audit, materiality would not apply to
item (h) above with respect to management or those employees who have significant roles in internal control.

.09 The written representations should be addressed to the auditor. Because the auditor is concerned
with events occurring through the date of his or her report that may require adjustment to or disclosure in the
financial statements, the representations should be made as of the date of the auditor's report. [If the auditor

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