What is a Management Letter?
A Management Letter is a letter prepared by an auditor which discusses findings and recommendations for improvements in internal control that were identified during the audit and other management issues.
Why do we require a Management Letter?
This letter gives us comfort that an organization has sound internal control financial processes in place. In addition, this letter identifies any material weaknesses encountered during the audit of the financial statements
Will having a material deficiency or other issue disqualify me?
The answer to this question is a resounding no. As long as a solution has been set in place and is underway you will receive the same level of consideration as all other applicants. Our goal here is not to punish organizations based on findings from the management letter.
What documents serve as a Management Letter?
The following two documents can serve as the Management Letter.
- Independent Auditors’ Communication of Internal Control Matters Identified in the Audit (example)
- Auditors’ ‘Required Communication’ (example)
For either document, you will find the document title (as shown in bold above) somewhere within the document itself. To reiterate, either document will satisfy our request for a Management Letter.
What if I Can’t Find My Management Letter?
If you can find neither document referenced above, you will need to request one or the other of these documents directly from your auditor.
What documents are not a Management Letter?
As information, the two documents which are not acceptable as management letters are the:
- Management Representation Letter (example) – a Management Representation Letter is the document that your organization provides to its auditors. It is most likely on your letterhead and will generally include the words ‘representation letter’ somewhere near the top of the document. The easiest way, however, to identify this document, if it exists in your files, is that it will have been signed by someone from your organization.
- Independent Auditors’ Report (example) – an Independent Auditors’ Report is the document that is attached to your audited financial statements. It will be relatively easy for you to identify this document. It will almost certainly include the title…Independent Auditors’ Report…at the very top of the document.
Does every organization have a management letter?
Not necessarily. If your organization did not commission an audit, then you will not be required to submit a management letter. Also, organizations with annual gross revenues below $500K are not required by the State of New Jersey to have an audit.