Auditing - Representation letter

					Format of Representation Letter
                              [To be typed on client letterhead]
                         [Date of approval of accounts by the Board]

(Firm's Name)

Chartered Accountants

(Firm's Address)

Dear Sirs,

Audit for the year ended ______________________

This representation letter is provided in connection with your audit of the balance sheet of [name
of Company] (the Company), as of [date], and the related profit and loss account, statements of
cash flows and changes in equity for the year then ended for the purpose of expressing an opinion
as to whether these financial statements give a true and fair view of the financial position of
the company and of the results of its operations and its cash flows in accordance with the
approved accounting standards as applicable in Pakistan and the requirements of the Companies
Ordinance, 1984.

We acknowledge our responsibility for the fair presentation of the financial statements in
conformity with approved accounting standards and the requirements of the Companies
Ordinance, 1984 and we approve the financial statements.

Certain representations in this letter are described as being limited to matters that are material.
We understand that items are considered material if they involve an omission or misstatement of
accounting information that could influence the economic decisions of users taken on the basis of
the financial statements. Materiality depends on the size of the item or error judged in the
particular circumstances of its omission or misstatement.

We have made appropriate inquiries of directors and officers of the Company with the relevant
knowledge and experience. Accordingly, we confirm, to the best of our knowledge and belief,
the following representations:

1.    The financial statements referred to above are presented fairly, in all material respects, in
      accordance with approved accounting standards as applicable in Pakistan and the
      requirements of the Companies Ordinance, 1984.

2.    The accounting policies, which are material or critical in determining the results for the
      year or state of affairs are set out in the accounts and are consistent with those adopted in
      the preparation of the accounts for the previous accounting period.
3.   We have made available to you all books of account and supporting documentation and all
     minutes of meetings of shareholders and the Board of Directors, and summaries of actions
     of meetings held after period end for which minutes have not yet been prepared.

4.   We confirm that all transactions entered during the year have been approved at appropriate
     level according to materiality levels approved by the Board of Directors.

5.   There has been no known actual or possible non-compliance with laws and regulations that
     could have a material effect on the financial statements in the event of non-compliance.

6.   We confirm that:

     (a)   We understand that the term “fraud” includes misstatements resulting from
           fraudulent financial reporting and misstatements resulting from misappropriation of
           assets. Misstatements resulting from fraudulent financial reporting involve
           intentional misstatements or omissions of amounts or disclosures in financial
           statements to deceive financial statement users. Misstatements resulting from
           misappropriation of assets involve the theft of an entity’s assets, often accompanied
           by false or misleading records or documents in order to conceal the fact that the
           assets are missing.

     (b)   We acknowledge responsibility for the implementation and operation of accounting
           and internal control systems designed to prevent and detect fraud and error.

     (c)   We have disclosed to you the results of our assessment of the risks that the financial
           statements may be materially misstated as a result of fraud.

     (d)   We have disclosed to you all significant facts relating to any known frauds or
           suspected frauds that may have affected the Company [or There have been no
           instances of frauds or suspected frauds that may have affected the Company].

7.   We believe the effects of uncorrected financial statement misstatements (summarized in the
     accompanying schedule) are immaterial, both individually and in the aggregate, to the
     financial statements taken as a whole. [Summary of uncorrected financial statement
     misstatements should be attached.]

8.   We confirm the completeness of the information provided to you regarding the
     identification of related parties and regarding transactions with such parties that are
     material to the financial statements. The identity of, and balances and transactions with,
     related parties have been properly recorded and when appropriate, adequately disclosed in
     the financial statements. The records required by listing regulations in respect of related
     party transactions have been adequately maintained and the prices have been determined in
     accordance with the guidelines provided therein. We understand that, as defined in
     International Accounting Standard 24, Related Party Disclosures, parties are considered to
     be related if one party has the ability to control the other party or exercise significant
     influence over the other party in making financial and operating decisions. Related party
     transactions are transfers of resources or obligations between related parties, regardless of
     whether a price is charged.
9.      All sales transactions are final and there are no side agreements with customers or other
        terms that allow for the return of merchandise, except for conditions covered by the usual
        and customary warranties.

10.     Receivables reported in the financial statements represent valid claims against debtors for
        sales or other charges arising on or before the balance sheet date and appropriate provisions
        have been made for losses that may be sustained on un-collectible receivables.

11.     We have no plans or intentions that may materially alter the carrying value or classification
        of assets and liabilities reflected in the financial statements. We believe that the carrying
        amounts of all material assets will be recoverable.

12.     We have no plans to abandon lines of product or other plans or intentions on behalf of the
        Company that will result in any excess or obsolete inventory, and no inventory is stated at
        an amount in excess of net realizable value.

13.     We confirm that we have reviewed all financial assets and liabilities outstanding as of
        [balance sheet date] and have correctly classified them as either:

     financial assets or liabilities held for trading;

     held-to maturity investments;

     loans and receivables originated by the Company;

     available for sale financial assets; or

     other financial liabilities in accordance with the requirements of IAS 39, Financial
      Instruments: Recognition and Measurement, and that they are appropriately recorded at their
      fair value, amortized cost or cost based on their classification.

14.     We have accounted for derivatives and hedging activities in accordance with International
        Financial Reporting Standards and complied with the applicable hedge accounting,
        designation, documentation and effectiveness assessment requirements of these standards.

        [Depending on the volume and complexity of derivative activities, representations about
        derivative financial instruments may also include representations about:

     management’s objectives with respect to derivative financial instruments, for example,
      whether derivatives are used for hedging or speculative purposes;

     the financial statement assertions concerning derivative financial instruments, for example:

     the records reflect all derivative transactions;

     all embedded derivative instruments have been identified;

     the assumptions and methodologies used in the derivative valuation models are reasonable;
     whether all transactions have been conducted at arm’s length and at fair market value;

     the terms of derivative transactions;

     whether there are any side agreements associated with any derivative instruments;

     whether the entity has entered into any written options; and

     whether the entity complies with the documentation requirements of the financial reporting
      framework for derivatives that are conditions precedent to specified hedge accounting

15.     Information regarding financial risks exposure and our financial risk management
        objectives and policies has been adequately disclosed in the financial statements, as
        required by IAS 32, Financial Instruments: Disclosure and Presentation.

16.     Presentation and disclosure of the fair value measurements of material assets, liabilities and
        components of equity are in accordance with International Financial Reporting Standards.
        The amounts disclosed represent our best estimate of fair value of assets and liabilities
        required to be disclosed by these standards. The measurement methods and significant
        assumptions used in determining fair value have been applied on a consistent basis, are
        reasonable and they appropriately reflect our intent and ability to carry out specific courses
        of action on behalf of the Company where relevant to the fair value measurements or

        [In addition to the general representation, other situations may exist where more specific
        representations may be considered for inclusion. For example, the engagement team may
        wish to obtain representations specific to an asset or liability requiring fair value
        measurements depending on its nature, materiality and complexity.

        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:

     specific assets or liabilities requiring fair value measurements;

     the basis used by management to overcome the presumption relating to the use of fair value
      set forth under the entity’s financial reporting framework;

     the completeness and appropriateness of disclosures related to fair values under the entity’s
      financial reporting framework;

     whether subsequent events require adjustment to the fair value measurements and disclosures
      included in the financial statements.]

17.     The Company has satisfactory title to all assets and there are no liens or encumbrances on
        the company’s assets, except for those that are disclosed in Note(s) ___ to the financial
        statements. Fixed assets are depreciated at appropriate rates to reduce the assets to their
        estimated residual value at the end of their expected useful lives. Addition to fixed assets
         during the year represent actual capital expenditure and no expenditure of a capital nature
         was charged to the operations of the company during the year. Fixed assets sold during the
         year were properly accounted for in the books of the company.

18.      The following have been properly recorded and when appropriate, adequately disclosed in
         the financial statements:

     losses arising from sale and purchase commitments;

     agreements and options to buy back assets previously sold;

     assets pledged as collateral;

     off-balance sheet activities, including transactions with special purpose entities, non-
      consolidation and revenue recognition;

     significant common ownership or management control relationships;

     changes in accounting principles affecting consistency;

19.      We have recorded or disclosed, as appropriate, all liabilities, both actual and contingent,
         and have disclosed in Note _____ to the financial statements all guarantees that we have
         given to third parties.

20.      The estimated financial effect of pending or threatened litigation and claims against the
         Company has been properly recorded or disclosed in the financial statements. Except as
         disclosed, we are not aware of any additional claims that have been or are expected to be

21.      Except as disclosed in the financial statements or footnotes to the financial statements,
         there are no:

     other gain or loss contingencies or other liabilities that are required to be recognized or
      disclosed in the financial statements, including liabilities or contingencies arising from
      environmental matters resulting from illegal or possibly illegal acts, or possible violations of
      human rights legislation;

     material transactions that have not been properly recorded in the accounting records
      underlying the financial statements;

22.      The Company has complied with all aspects of contractual agreements that could have a
         material effect on the financial statements in the event of non-compliance.

23.      There are no formal or informal compensating balance arrangements with any of our cash
         and investment accounts. We have no line of credit arrangements other than those
         disclosed in Note ___ to the financial statements.

25.      There are no significant matters that have arisen that would require a restatement of the
         corresponding figures.
        [This representation would be relevant only when comparatives are provided as
        corresponding figures.]

26.     We confirm that all the details /assessment orders etc. have been given to you. We also
        confirm that adequate provisions have been made including for assessment years where
        assessments have not yet been finalized.

27.     We have reviewed all estimates and basis used for recording transactions (including staff
        benefits), and confirm that the same are reasonable, relevant and consistently applied in
        assessing assets and liabilities

28.     There have been no events subsequent to the balance sheet date which require adjustment
        of or disclosure in the financial statements or Notes thereto, except as disclosed in the Note
        ____ to the financial statements. Should any of such events occur between the date of this
        letter and the date of AGM we shall let you know.

        [Additional representations to address specific circumstances of the client

        The engagement team would consider asking management to provide representations with
        respect to material matters including matters impacted by:

     significant assumptions made by management;

     management intent;

     information that is only known to management.

        The purpose of obtaining representations from management with respect to these types of
        matters is to confirm that:

     the engagement team has an understanding of management’s intent and the relevant
      assumptions made with respect to these matters; and

     management has provided the engagement team with all relevant information in relation to
      these matters, i.e., that there are no undisclosed issues such as side agreements that may
      impact the engagement team’s conclusions about the matters]

                                           Yours faithfully,

          Chief Executive                                              Finance Director/Manager

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Description: Internal Audit and External Audit samples.