ICAI Releases FAQs Guide on Management Representation Letter (MRL) - August 2025 Edition [Read FAQs]

The Institute of Chartered Accountants of India ( ICAI ), through its Auditing and Assurance Standards Board (AASB), has published a guide titled “FAQs on Management Representation Letter (MRL)” in August 2025.

This 104-page publication is designed to support auditors and Chartered Accountants in understanding one of the most important aspects of auditing - Management Representations.

A Management Representation Letter is a written confirmation given by the company’s management to the auditor during an audit. As required by Standard on Auditing (SA) 580, it confirms that management has prepared the financial statements responsibly, complied with applicable financial reporting frameworks, and provided all relevant and complete information to the auditor.

Management representations are a fundamental part of the audit process. They serve as important audit evidence to support other information gathered during the course of an audit. Auditors perform independent checks but they also require formal acknowledgment from management that the financial data presented is accurate, complete, and fairly prepared.

The FAQs guide released by ICAI explains:

• The purpose and scope of MRLs under SA 580.
• When and how auditors should obtain MRLs.
• The content that should be included in an MRL.
• What auditors should do if management refuses to provide the letter or gives incomplete information.
• The role of MRLs in strengthening audit quality, accountability, and compliance.

Auditors must obtain formal written confirmation from management regarding their responsibilities for preparing financial statements and providing all necessary disclosures. Without such confirmation, the audit process may remain incomplete, and in some cases, auditors may even have to issue a disclaimer of opinion.

Key FAQs from the Guide

1. When to update a Management Representation Letter (MRL)?

• If there’s a delay in signing the auditor’s report.
• When a predecessor auditor is asked to reissue a report for comparative statements.
• If any facts/events arise after the earlier representation that affect prior assertions.

2. Can management modify the wording of representations?

• Yes, sometimes management may qualify statements like “to the best of our knowledge and belief.”
• The auditor can accept such wording if satisfied that those making the representations have appropriate authority and knowledge.

3. Separate MRLs in Consolidated Financial Statements (CFS)?

• Auditors of consolidated accounts should obtain MRL from the parent’s management.
• Component auditors’ work can be reviewed but there is no need for separate MRLs from each subsidiary.

4. Key matters for CFS representations:

Completeness of all group components.

• Accuracy of consolidation adjustments (like elimination of intra-group balances).
• Consistency of accounting policies across entities.
• Disclosure of related parties and segments.

5. Additional considerations in MRLs:

• Compliance with CARO 2020, SEBI LODR rules, and Guidance Notes.
• Disclosure of pending litigations, fraud reporting, CSR compliance, and audit trail compliance under Rule 11(g).
• Specific confirmations about property, inventory, loans, and related-party transactions.

6. Checklist for auditors under SA 580 (Appendix IV):

• Was MRL dated close to the auditor's report?
• Were unique client circumstances addressed?
• Did the letter include a summary of uncorrected misstatements?
• Were representations corroborated with other audit evidence?

7. Illustrative templates included in the guide:

• Standard MRL format.
• Format for updating an earlier MRL.
• Format for additional matters.
• Compliance checklist for SA 580.

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