A Purpose of a Management Representation Letter Is to Reduce

question 212

Multiple Choice

A purpose of a management representation letter is to reduce:

• A) Audit risk to an aggregate level of misstatement that could be considered material.
• B) An auditor's responsibility to detect material misstatements only to the extent that the letter is relied on.
• C) The possibility of a misunderstanding concerning management's responsibility for the financial statements.
• D) The scope of an auditor's procedures concerning related party transactions and subsequent events.

---

Definitions:

Monopsony Buyer

A market condition where there is only one buyer for many sellers, giving the buyer significant control over prices.

Marginal Expenditure

The increase in cost that arises when buying an added unit of a product or service.

Average Expenditure

The average amount spent per unit of a good or service.

Competitive Buyer

An individual or entity that purchases goods or services in a market where there is competition, aiming to obtain the best possible price and quality.