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AUDITOR'S REPORTS What is a "management representation letter"? What are the different types of auditor's reports? As noted earlier, management is ultimately re- sponsible for the financial statements, regardless of the degree of auditor involvement in their preparation. Accordingly, auditors are required by GAAS to obtain direct written acknowledge- ment from management of this responsibility. Auditors also need to obtain written assurance from management that the financial statements are, in fact, complete. These and other similar assertions are contained in a formal document known as the management representation letter. The management representation letter also ad- dresses anumber of specific events and situa- tions that could have an effect upon the auditor's evaluation of the fair presentation of the finan- cial statements. For example, is management aware of any possible violations of laws or regu- lations? Are there any restrictions on cash bal- ances? Are there any lines of credit or similar arrangements? The management representation letter generally is dated as of the last day of the auditor's field- work and signed by the chief executive officer, the chief financial officer, and the chief account- ing officer. In some instances, other government officials also may be asked by the auditor to sign the letter (e.g., budget officer, grants officer). The management representation letter just de- scribed should not be confused with the "man- agement letter" used by auditors to report various control weaknesses discovered in the course of the audit to management. This latter document is described in more detail in the sec- tion of this booklet devoted to auditor's reports. 20 AN ELECTED OFFICIAL'S GUIDE In the public sector, there are three commonly encountered auditor's reports. • The independent auditor's report on the fair presentation of the financial statements (re- quired for all financial audits) • The independent auditor's report on compli- ance and internal controls over financial re- porting based on an audit of the financial statements (required for all Yellow Book au- dits, including Single Audits) • The independent auditor's report on compli- ance and internal controls over compliance ap- plicable to each major federal award program (required for Single Audits) Furthermore, auditors performing Single Audits are required to report on the fair presentation of the Schedule of Expenditures of Federal Awards. Auditors typically expand their report on the fair presentation of the financial statements to meet this requirement. TO AUDITING 29