a. Two reasons for obtaining letters of representation from client’s management:

1. Support for Management’s Intentions or Judgments: The letter provides evidence supporting the auditor’s understanding of management’s intentions or judgments on specific matters, such as future plans or inventory valuation.
2. Completeness of Information: It serves as confirmation from management that all relevant information has been disclosed, ensuring that no liabilities, transactions, or conditions are omitted that could materially affect the financial statements.

b. Three steps if a representation by management is contradicted by other audit evidence:

1. Reassess the Risk: The auditor should reconsider the initial risk assessment for the area and determine if further detailed audit procedures are necessary.
2. Perform Additional Audit Procedures: The auditor should undertake additional tests or investigations to obtain sufficient appropriate audit evidence to resolve the discrepancy.
3. Document and Report Concerns: If the auditor is still uncertain or concerned about management’s integrity, they should document their concerns and, where necessary, consider the implications for the audit, including the potential to withdraw from the engagement.

c. Draft of Letter of Representation:

EDINBURG NIGERIA LIMITED
172, Idowu Taylor Street, Victoria Island, Lagos
18 April, 2024

The Managing Partner
Olumisi Oregun & Co.
(Chartered Accountants)
432 Broad Street, Lagos

Dear Sir,

RE: AUDIT OF OUR COMPANY’S ACCOUNTS FOR THE YEAR ENDED DECEMBER 31, 2023

In addition to the disclosures in the financial statements and other information presented to you for the audit of our company’s accounts for the year ended December 31, 2023, we wish to provide the following confirmations:

1. Inventory in Niger Republic
   Due to civil unrest in Niger Republic, your firm was unable to visit the country to verify our inventory. We confirm that the inventory, valued at ₦15 million, is safely stored and fully insured against all risks.
2. Donation to Motherless Babies Home
   A donation of ₦500,000 was made to Ojota Motherless Baby’s Home, but the receipt was unavailable due to stock shortages at the home. We confirm the donation was made, and a receipt will be provided once available.
3. Chairman’s Medical Treatment
   Our Chairman incurred medical expenses of ₦600,000 during an official visit to Germany. Unfortunately, no documentary evidence was obtained. We confirm the amount is within the approved medical expenditure limit and have contacted the hospital for relevant documents.

If you require further clarification or additional information, please do not hesitate to contact us.

Yours faithfully,
For: EDINBURG NIGERIA LIMITED
Edwin Olusoga
Managing Director/CEO