Question 4 (9 marks) As audit senior in charge of the audit of Q Limited, you have asked your audit staff to review the audit files and make a list of items for inclusion in the management representation letter The staff have provided the following draft list of points Liabilities All contingent liabilities have been discussed and appropriate disclosures made in respect of all known contingencies All known subsequent events have been discussed and appropriately treated in the financial report Property, Plant and Equipment All non current assets are stated at a value below their recoverable amount All assets are being depreciated over their estimated useful lives Trade Receivables Adequate allowance has been made for all known doubtful trade debtors Current assets include other receivables of $650,000 in respect of amounts receivable on settlement of a contract for the sale of commercial property The directors confirm that it is their intention to settle the contract during the 2019 2020 financial year Required Outline the main purpose of a management letter From the information gathered above, outline the items which should be included in the management representation letter, giving reasons (1 6 7 marks) The directors of Q Limited have refused to provide a management representation letter What action should the auditor take as a result of this refusal (2 marks)

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Question 4 (9 marks) As audit senior in charge of the audit of Q Limited, you have asked your audit staff to review the audit

Question 4 (9 marks)

As audit senior in charge of the audit of Q Limited, you have asked your audit staff to review the audit files and make a list of items for inclusion in the management representation letter. The staff have provided the following draft list of points:

Liabilities

All contingent liabilities have been discussed and appropriate disclosures made in respect of all known contingencies.
All known subsequent events have been discussed and appropriately treated in the financial report.

Property, Plant and Equipment

All non-current assets are stated at a value below their recoverable amount.
All assets are being depreciated over their estimated useful lives.

Trade Receivables

Adequate allowance has been made for all known doubtful trade debtors.
Current assets include other receivables of $650,000 in respect of amounts receivable on settlement of a contract for the sale of commercial property. The directors confirm that it is their intention to settle the contract during the 2019/2020 financial year.

Required:

Outline the main purpose of a management letter. From the information gathered above, outline the items which should be included in the management representation letter, giving reasons.

(1+6= 7 marks)

The directors of Q Limited have refused to provide a management representation letter. What action should the auditor take as a result of this refusal? (2 marks)