Representation Letter for Construction Contractors
To: Wiebel, Hennells & Carufe, P.A. We are providing this letter in connection with your review(s) of the of as of and for the for the purpose of expressing limited assurance that there are no material modifications that should be made to the statements in order for them to be in conformity with generally accepted accounting principles. I confirm that We are responsible for the fair presentation in the financial statements of financial position, results of operations, and cash flow in conformity with generally accepted accounting principles. Certain representations in this letter are described as being limited to matters that are material. Items are considered material, regardless of size, if they involve an omission or misstatement of accounting information that, in light of surrounding circumstances, makes it probable that the judgment of a reasonable person relying on the information would be changed or influenced by the omission or misstatement. We confirm, to the best of our knowledge and belief, as of representations made to you during your review(s). , the following
1. The financial statements referred to above are fairly presented in conformity with generally accepted accounting principles. 2. We have made available to you a. All financial records and related data. b. All minutes of the meetings of stockholders, directors, and committees of directors, or summaries of actions of recent meetings for which minutes have not been prepared. 3. There are no material transactions that have not been properly recorded in the accounting records underlying the financial statements. 4. We have have no plans or intentions that may materially affect the carrying value or classification of assets and liabilities. 5. There are no material losses (such as from obsolete inventory or purchase commitments) that have not been properly accrued or disclosed in the financial statements. 6. There are no a. 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. b. Unasserted claims or assessments that my (our) lawyer has advised me (us) are probable of assertion that must be disclosed in accordance with Statement of Financial Accounting Standards No. 5.
c. c. Other material liabilities or gain or loss contingencies that are required to be accrued or disclosed by FASB Statement NO.5.
The Company has satisfactory title of all owned assets, and there are no liens or encumbrances on such assets nor has any asset been pledged as collateral. We have complied with all aspects of contractual agreements that would have a material effect on
the financial statements in the event of noncompliance.
9. The following have been properly recorded or disclosed in the financial statements: a. Related party transactions and related accounts receivable or payable, including sales, purchases, loans, transfers, leasing arrangements, and guarantees. b. Guarantees, whether written or oral, under which the company is contingently liable. 10. There are no estimates that may be subject to material change in the near-term that have not been properly disclosed in the financial statements. We understand that near-term means the period within one year of the date of the financial statements. In addition, we have no knowledge of concentrations existing at the date of the financial statements that make the company vulnerable to the risk of a near-term severe impact that have not been properly disclosed in the financial statements.! 11. No events have occurred subsequent to the balance sheet date and through the date of this letter that would require adjustment to, or disclosure in, the financial statements. 12. Regarding contracts completed during the year and in-process as of a. The lists of contracts completed during the year and in process as of represent complete listings of all the Company's contract activity, and there were no unauthorized or unrecorded uses of the Company's assets on any projects during the year. Furthermore, there were no unrecorded revenues for contract-related work during the year. b. The Company uses the percentage-of-completion method of recognizing income on all contracts for financial reporting purposes. We believe this to be an acceptable method in accordance with the appropriate accounting literature. We believe that our estimates of costs to complete and extent of progress on all contracts in progress are reasonable and attainable. c. Adequate provisions for losses have been provided on all loss contracts. d. There are no unapproved change orders, unrecorded . 13. The joint venture (partnering) agreements and financial statements of the ventures that we provided to you are complete and accurate. We have properly accounted for all joint venture (partnering) arrangements that existed throughout the year. 14. We have approved all standard, adjusting or correcting journal entries to our financial
statement proposed by you.
15. In regards to the state the nonattest services provided serviced performed by you, we have Made all management decisions and performed all management functions.
Designated a competent employee to oversee the services.
Evaluated the adequacy and results of the services performed. Accepted responsibility for the results of the services.
16. Established and maintained internal controls, including monitoring ongoing activities. 17. We have responded fully and truthfully to all inquiries you made to us during your review.
Type The Name Of Owner Or Chief Executive Officer And Title Type The Name Of Chief Financial Officer And Title, Where Applicable
C The following are common representations that may need to be added to the letter to appropriately tailor it for individual client circumstances (this list is not all-inclusive): The financial statements disclose all of the matters which we are aware that are relevant to the company's ability to continue as a going concern, including significant conditions and events, and management's plans. I (YVe) have reviewed long-lived assets and certain identifiable intangibles to be held and used for impairment whenever events or changes in the circumstances have indicated that the carrying amount of its assets might not be recoverable and have appropriately recorded the adjustment. Debt securities that have been classified as held-to-maturity have been so classified due to my (our) intent to hold such securities to maturity and my (our) ability to do so. All other debt securities have been classified as available-for-sale or trading. I (we) consider the decline in value of debt or equity securities classified as either available-for-sale or held-tomaturity to be temporary. Receivables recorded in the financial statements represent valid claims against debtors for sales or other charges arising on or before the balance sheet date and have been reduced to their estimated net realizable value I (YVe) believe that the carrying amounts of all material assets will be recoverable. Agreements to repurchase assets previously sold have been properly disclosed. Arrangements with financial institutions involving compensating balances or other arrangements involving restrictions on cash balances, lines of credit, or similar arrangements have been properly disclosed. Capital stock repurchase options or agreements or capital stock reserved for options, warrants, conversions, or other requirements have been properly disclosed I (we) have approved all standard, adjusting, or correcting journal entries to our financial statements proposed by you.
D The accountant also should consider adding representations made by the client that are unusual. For example, additional representations might relate to: Oral transactions. Aggressive tax elections. Future plans or commitments. Actions allowed by regulatory agencies that are not documented in writing or by legal reference.
Assumptions made when determining deferred taxes under SFAS No. 109 (for example, taxplanning strategies utilized or responsibility for estimates used to determine whether a deferred tax asset valuation is necessary). Contributions to employee benefit plans or bonuses not documented in the company's minutes. GAAP changes/adoption. Lawsuits, regulatory actions, etc. IRS examinations or other matters.
Pension payments made after client's year end. Financial instruments with off-balance-sheet risk (prior to the adoption of SFAS No. 133) and financialinstruments with concentration of credit risk. Derivative financial instruments. Use of a specialist.
The appropriateness of actuarial assumptions used to measure pension liabilities and costs. Environmental remediation liabilities and related loss contingencies. Material deferred charges. Management has the intent and ability to refinance short-term debt on a long-term basis. Unusual considerations involved in determining the application of the equity method of accounting. Existence and completeness of derivatives and appropriate characteristics of hedges. Impairment of goodwill and other intangible assets not subject to amortization. Other representations relied on during the review.. Special purpose entities
If the accountant is providing nonattest services as part of the attest services (for example preparing journal entries), the provisions of the revised Ethics Interpretation 101-3, Performance of Nonattest Services, must be followed for the accountant to maintain his or her independence. A new provision of the Interpretation requires the client to agree to perform certain functions in connection with the nonattest services. Although not required by ET Interpretation 101-3, the accountant might consider adding the following additional representation to the management representation letter: In regards to the rstate the nonattest services providedl services performed by you, we have: . Made all management decisions and performed all management functions. . Designated a competent employee to oversee the services. . Evaluated the adequacy and results of the services performed. . Accepted responsibility for the results of the services. . Established and maintained internal controls, including monitoring ongoing activities. As discussed in Chapter 7, in December 2003, ARSC issued an exposure draft of a proposed Statement on Standards for Accounting and Review Services, Performance of Review Engagements. Part of that proposed Statement includes additional requirements related to management representations regarding management's responsibility to prevent and detect fraud and any knowledge of fraud or suspected fraud. The proposed Statement would be effective for reviews of financial statements for periods ending on or after December 31, 2004. Future editions of this Guide will update the status of this project. According to SSARS No. 1 (AR 100.29), representation letters should include all periods covered by the accountant's report. The qualitative discussion of materiality used in this letter is adapted from FASB Statement of Financial Accounting Concepts No.2, Qualitative Characteristics of Accounting Information.