SAS No. 07 Management Representations


Issued by Auditing Standards Committee in Taiwan on 30 September, 1985.


The auditor should obtain audit evidence that management acknowledges its responsibility for the fair presentation of the financial statements. The auditor should obtain written representations from management on matters material to the financial statements when other sufficient appropriate audit evidence cannot reasonably be expected to exist.

In connection with an audit of financial statements presented in accordance with generally accepted accounting principles, specific representations should relate to the following matters:

  • Management's acknowledgment of its responsibility for the fair presentation in the financial statements of financial position, results of operations, and cash flows in conformity with generally accepted accounting principles.
  • Management's belief that the financial statements are fairly presented in conformity with generally accepted accounting principles.
  • Availability of all financial records and related data.
  • Completeness and availability of all minutes of meetings of stockholders, directors, and committees of directors.
  • Communications from regulatory agencies concerning noncompliance with or deficiencies in financial reporting practices.
  • Absence of unrecorded transactions.
  • Information concerning subsequent events.
  • Management's acknowledgment of its responsibility for the design and implementation of programs and controls to prevent and detect fraud.
  • Knowledge of fraud or suspected fraud affecting the entity involving (1) management, (2) employees who have significant roles in internal control, or (3) others where the fraud could have a material effect on the financial statements.
  • Knowledge of any allegations of fraud or suspected fraud affecting the entity received in communications from employees, former employees, analysts, regulators, short sellers, or others.
  • Plans or intentions that may affect the carrying value or classification of assets or liabilities.
  • Information concerning related-party transactions and amounts receivable from or payable to related parties.
  • Guarantees, whether written or oral, under which the entity is contingently liable.
  • Significant estimates and material concentrations known to management that are required to be disclosed.
  • 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.
  • Unasserted claims or assessments that the entity's lawyer has advised are probable of assertion and must be disclosed.
  • Other liabilities and gain or loss contingencies that are required to be accrued or disclosed.
  • Satisfactory title to assets, liens or encumbrances on assets, and assets pledged as collateral.
  • Compliance with aspects of contractual agreements that may affect the financial statements.

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. The letter should be signed by those members of management with overall responsibility for financial and operating matters whom the auditor believes are responsible for and knowledgeable about, directly or through others in the organization, the matters covered by the representations. Such members of management normally include the chief executive officer and chief financial officer or others with equivalent positions in the entity.

Management's refusal to furnish written representations constitutes a limitation on the scope of the audit sufficient to preclude an unqualified opinion and is ordinarily sufficient to cause an auditor to disclaim an opinion or withdraw from the engagement. However, based on the nature of the representations not obtained or the circumstances of the refusal, the auditor may conclude that a qualified opinion is appropriate.

If the auditor is precluded from performing procedures he or she considers necessary in the circumstances with respect to a matter that is material to the financial statements, even though management has given representations concerning the matter, there is a limitation on the scope of the audit, and the auditor should qualify his or her opinion or disclaim an opinion.

Effective date

This Statement is effective for audit of financial statements with fiscal years ending on or after 31 December, 1985.

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