This letter is most sought after document which an Auditor seeks from the Management of the Company once he has been appointed to audit there accounts. This letter sets out the scope of responsibility which each side assumes and intents, thereby help fix accountability. A sample Management Representation Letter is :
ABC PRIVATE LIMITED
Regd. Office: 8, Abc Lane, Mumbai-700 001 (Maharasthra)
XYZ & Co.
Junction Road,T20, 2nd Floor,
Mumbai – 700 001
Re: Representation of management for the Statutory Audit for the year ending 31st March, 2016.
This representation letter is provided in connection with your audit of the financial statements, the Balance Sheet as at 31st March, 2016 and the Profit & Loss Account for the year ended on that date for the purpose of expressing an opinion as to whether the said financial statements give a true and fair view of the said financial position ofABC Private Ltd. of 31st March, 2016 and of the results of operations for the year then ended. We acknowledge our responsibility for preparation of the said financial statements in accordance with the requirements of the Companies Act, 1956 and recognized accounting policies and practices, including the Accounting Standards issued by the Institute of Chartered Accountants of India.
We confirm, to the best of our knowledge and belief, the following representations:
- The accounting policies which are material or critical in determining the results of operations for the year and financial positions are set out in the financial statements are consistent, with those adopted in the financial statements for the previous year. The financial statements are prepared on accrual basis except as stated otherwise in the financial statements.
- The company has a satisfactory title to all assets and there are no liens or encumbrances on the Company’s assets and that the title deeds of immovable property are in possession of the Company.
3.1. The company has maintained proper records showing full particulars including quantative details and situation of fixed assets.
The fixed assets of the Company are physically verified according to a phased programme designed to cover all items over a period of three years.
Addition to Fixed Assets amounting to Rs……… have been made and put to use during the year.
We further confirm that no capital expenditure incurred in relation to above assets charged to revenue account.
3.2. The net book values at which fixed assets are stated in the balance sheet are arrived at:
- a) after taking into account all capital expenditure and additions thereto, but no expenditure properly chargeable to revenue;
- b) after eliminating the cost and accumulated depreciation relating to items sold, discarded, demolished or destroyed;
- c) after providing for adequate depreciation on fixed assets during the year.
- At the Balance Sheet date, there were no outstanding commitments.
- The company has not purchased/sold any goods during the year nor is there any opening stocks.
6.1 All the investments are considered as long term investment and are stated at cost. No provision has been made for diminution in value of Investments which are considered temporary in nature by the management.
6.2 The investments as shown in the books are properly valued. Proper records have been maintained for the transaction relating to shares and timely entries have been made. All the securities shown there have been held by the Company in its own name.
6.3 The basis of valuation is the same as those used in the previous year.
DEBTORS, LOANS AND ADVANCES:
7.1. Sundry debtors as on 31.03.16 comprise of amount receivable from Revive Traders Pvt. Ltd.
7.2. The following items appearing in the books as at 31st March, 2016 are considered good and fully recoverable. No provisions have been made against them.
OTHER CURRENT ASSETS:
- In the opinion of the Board of Directors, other current assets have a value on realization in the ordinary course of the Company’s business which is at least equal to the amount at which they are stated in the Balance Sheet.
- The company has Rs. ……………. as Cash balance as on 31.03.16 as certified by the management.
9.1. The debit and credit balances of current liabilities and advances have been correctly allocated and shown in the balance sheet.
9.2. We have recorded all known liabilities in the financial statements. No legal case is pending except those stated in the financial statements against the company or instituted by the Company, which would give rise to any material liability.
- We state that we did not give any guarantee to third parties.
- There is co contingent liability to the knowledge of the Management which may likely to result in a loss and which, therefore, require adjustment of assets or liabilities.
PROVISION FOR CLAIMS AND LOSSES:
- Provision has been made in the accounts for all known losses and claims of material amounts.
- There have been no events subsequent to the balance sheet date, which require adjustment of or disclosure in, the financial statements or notes thereto.
PROFIT AND LOSS ACCOUNT:
14.1. Except as disclosed in the financial statements, the results for the year were not materially affected by:
- transactions of a nature not usually undertaken by the company;
- circumstances of an exceptional or non – recurring nature;
- charges or credits relating to prior years;
- changes in accounting policies.
14.2. The allocation between capital and revenue has been correctly done and that no expenditure of capital nature has been charged to revenue.
- We confirm following representation in respect of related parties:
- We have identified all the related parties and transactions with such parties. The information provided to you is complete in all respects.
- The disclosures made in the financial statements are adequate having regard to the framework under which the financial statements have been drawn.
- The financial statements are free from material misstatements, including omissions with regard to related parties and transactions with related parties.
16.1 Deferred Tax Assets have not been recognized as there is no reasonable certainty that sufficient future taxable income will be available to realize the same.
16.2 The Company does not have any assets which are required to be impaired in accordance with provision of AS 28 issued by The Institute of Chartered Accountants of India.
16.3 The Company has entered into any derivative instruments for trading or speculative purposes and Rs…………. is receivable from XY Traders Pvt. Ltd. in that regard as on 31.03.2016.
- The Company do not have sale and purchase commitments and has not pledged its assets as collateral security.
- There have been no irregularities involving management or employees which have a Significant role in the system or internal control that could have a material effect on the financial statement.
There are adequate internal control procedures commensurate with the size of the company and the nature of its business with regard to purchase of inventory, fixed assets and for sale of goods.
- The financial statements are free of material mis-statements, including omissions.
20.1. The Company has complied with all aspects of contractual agreement that could have a material impact on the financial statements in the event of non-compliance. There has been no non-compliance with requirements of regularity authorities that could have a material impact on the financial statements in the event of non-compliance.
20.2. There is no contravention during the year of the provisions of section 74,75,180, 185 and 186 of the Companies Act, 1956 as amended.
- We have no plans or intentions that may materially affect the carrying value or classification or assets and liabilities reflected in the financial statements.
- All purchase/acquisitions and disposals of fixed assets and investments made during the year have duly been approved by appropriate authority.
- There are no payments or remuneration provided or paid to Directors and/or other managerial personnel during the year which required disclosure in pursuance of Schedule III to the Companies Act, 2013 besides what have been shown in the financial statements.
- No personal expenses of employees or Directors other than those payable under contractual obligations or in accordance with the prevailing practices have been charged to revenue.
- There is no undisputed amount payable in respect of Income Tax, Wealth Tax, Service Tax, Sales Tax, Custom Duties and Excise Duties and any other statutory dues outstanding as at the year end for a period of more than six months from the day they became payable. Company is regular in payment of all undisputed statutory dues relating to all that enactment’s which have been enforced by law.
- We have received representation from all our Directors confirming that none of the companies in which they are Directors, has violated any provisions of section 164 of the Companies Act, 2013, which precludes them from being a Director of a Public Limited Company and in particular none of these companies has defaulted in. Filing the Annual Accounts and Annual Returns within the prescribed time for the financial year 2013-14, 2014-15 and 2015-16.Repaying its deposit or interest thereon on due date or redeem its Debentures on due date or pay dividend and such failure has continued for one year or more.
28.Register of Contracts:
- The Company has recorded particulars of all contracts or arrangements in Register (MBP-4) referred to in section 189(1) of the Companies Act, 2013 read with rule 16(1), in the register required to be maintained under that section.
- The rate of interest and other terms and conditions on which loans given to companies, firms or other parties have been stated in Register maintained pursuant to section 186 of the Companies Act, 2013 they are not prima facie prejudicial to the interest of the company.
- There is no overdue amount of interest or installment on loan borrowed from companies, firms or other parties as stated in the register maintained for that purpose.
- The Company has not given any guarantee for loans taken by others from Bank or financial institutions.
- The Board of Directors monitors and reviews the operation of Company periodically. The Board of Directors verifies, cross check various accounts, reports generated by computer system and during their review which covers:
- Cash flow including fund management (Bank reconciliation)
- statutory deduction, payment of statutory dues and timely submission of all returns
- Releasing payments and authorizing vouchers for expenses,
- Discharging dues to creditors, cost control measures etc.
- The company has not taken any loan or financial assistance from financial institutions and/or banks.
- The company has not granted any loans and advances on the basis of securities by way of pledge of shares, debentures or other securities.
- The company is neither a chit fund nor a nidhi/mutual benefit society..
- The company is not required to maintain cost records under section 209(1)(d) of the Companies Act, 1956 for any product of the company.
- The company has not accepted any deposit from public.
- The company has not raised any term loan during the year.
- The company has not used any funds raised on short term for long term investment.
- Preferencial Offer, if any, has been as per section 62(1)(c ) read with Rule 13 of Companies (Share Capital and Debentures) Rules, 2014 and Section 42 read with Rule 14 of Companies (Prospectus and Allotment of Securities) Rule 2014.
- The company has not issued any debentures.
- The company has not raised any money by public issue during the year.
- No fraud on or by the Company has come to our notice or reported during the year.
- The company is a Small and Medium Sized Company (SMC) as defined in the General Instructions in respect of Accounting Standards notified under the Companies Act, 1956. Accordingly the company has complied with the Accounting Standards as applicable to a Small and Medium Sized Company.
- Pursuant to sub-section (1) of section 467 of the Companies Act, 2013, the amount due to Micro and Small Enterprises, if any, has been disclosed in Balance Sheet.
For, ABC PRIVATE LIMITED