Letters of representation from clients

Outside an audit there is no rule that an accountant must obtain a letter of representation, but ICAEW guidance says written representations are useful when preparing accounts or tax computations that rely on information the client alone can confirm. A good letter records that the client is responsible for the figures, that they have given you everything relevant, and the specific judgements and facts you took from them, such as director’s loan account movements, related party transactions or a stock valuation.

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Is a letter of representation compulsory for accounts and tax work?

Only for audits. ICAEW’s Technical Advisory Service helpsheet on letters of representation explains that written representations are a requirement of the International Standards on Auditing (UK) for every audit, with ISA (UK) 580 setting out the core confirmations. The audit version is covered in our page on management representation letters.

For everything else, the same helpsheet treats a letter as good practice rather than an obligation. It says representations are useful to confirm, in writing with clients, information, assumptions and accounting treatments in non audit engagements. It then picks out three situations: accounts production, accounts based on assumptions and decisions made by management, and tax computations where information supplied is crucial and has not been independently corroborated.

Why get one if the accountant does not check the figures?

Precisely because the accountant does not check them. ICAEW describes a compilation engagement as one in which the practitioner takes the client’s data and arranges it into financial statements, and notes that the procedures do not involve verifying the data. PCRT Help Sheet A makes the same point for tax: a member acting as tax agent is not required to audit the books and records or verify information supplied by the client. The firm’s work is only as reliable as what it was told, so it makes sense to have what it was told in writing.

The law already puts primary responsibility on the client. Under section 386 of the Companies Act 2006 every company must keep adequate accounting records, and under section 414 the board must approve the annual accounts and a director must sign the balance sheet. For Self Assessment, section 8(2) of the Taxes Management Act 1970 requires every return to include a declaration by the taxpayer that it is correct and complete to the best of their knowledge. A letter of representation does not change any of this. It documents how the client met their side of it.

It can also help the client. HMRC’s Compliance Handbook at CH84540 says a person who uses an agent must still take reasonable care, and that HMRC will look at what passed between the person and the agent. Its benchmark of reasonable care is someone who goes to an apparently competent adviser, gives them a full and accurate set of facts, checks their work as far as they are able and adopts it. Under paragraph 18 of Schedule 24 to the Finance Act 2007, a taxpayer is not liable for a penalty for the agent’s error if they satisfy HMRC that they took reasonable care. A signed confirmation of the facts given is good evidence of the second step in that benchmark.

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When is a letter most useful?

ICAEW’s helpsheet suggests a letter where statutory accounts include disclosures that depend on information from management, giving post balance sheet events and related party transactions as examples, and where the accounts rest on decisions made by management, giving movements on a directors’ loan account as an example. In practice that points to situations such as:

a directors’ loan account that has moved significantly, because section 413 of the Companies Act 2006 requires advances and credits to directors to be disclosed in the notes, including amounts repaid, written off or waived;
stock, work in progress or property values that only the client can estimate;
cash takings, private use percentages and personal expenses paid through the business;
accounts prepared from incomplete records, where many figures are the client’s best estimate;
a personal tax return where the firm cannot see whether all income sources have been reported, such as overseas income or cryptoasset disposals.

What should a letter for accounts preparation cover?

Keep it short and specific. ICAEW warns, in the audit context, that a long list of representations about every asset and liability is no longer best practice because it detracts from the important points. The same logic applies to accounts work. A typical letter for a small company might cover:

Responsibility. The directors acknowledge their responsibility for keeping adequate accounting records and for the accounts, using the same description as the engagement letter.
Completeness. All accounting records and relevant information have been made available and all transactions have been recorded.
Specific items. The year end balance on each director’s loan account and what the movements represent; related party transactions; any events after the year end; the basis of any valuation the directors supplied.
Liabilities. There are no other liabilities, guarantees or claims against the company beyond those in the accounts.

The letter should come from the client, ideally on their own letterhead. ICAEW Insights, writing about audit letters in May 2026, stressed that the entity must be properly engaged with the process, that the letter should be on the entity’s letterhead and that board approval is generally better than a single director signing alone. Those points carry over to accounts preparation, particularly where there are several directors.

What should a letter for a tax return cover?

For a personal return the useful confirmations are about completeness and facts the firm has no way to see. Examples include confirmation that all sources of income and gains have been disclosed, that the client has told the firm about any overseas income, property or accounts, that private use percentages reflect actual use, and that figures given as estimates are the client’s best estimate. Where a return contains a judgement call, such as a valuation, record the basis the client gave you.

A representation letter is not the same as approval of the return. Approval confirms the client has seen and agreed the final return before submission, which is covered in our page on client approval before filing. Many firms combine the two in one document sent with the draft return.

How might this work in practice?

Illustration only. A firm prepares accounts for a two director company. The bank statements show £12,000 of payments for holidays and household bills. One director says they were repaid in cash before the year end. The firm treats the payments as loans and the cash as repayments, and the directors’ loan account closes at nil.

The firm asks both directors to sign a letter confirming that the £12,000 was personal spending, that it was repaid in cash on the dates given and that there were no other personal payments. If HMRC later opens an enquiry and finds no evidence of the cash repayments, the letter shows the treatment rested on the directors’ statement, not on an assumption by the firm. It does not protect the directors from the tax consequences, and it does not protect the firm if it ignored evidence pointing the other way.

What if the client refuses to sign, or a representation looks wrong?

A refusal is information. Ask which statement the client is unwilling to make and why. Sometimes the wording is simply too wide and can be narrowed. Sometimes it reveals a fact the client had not mentioned.

A letter never replaces judgement. PCRT Help Sheet A says a member should take reasonable care and exercise appropriate professional scepticism when making statements on a client’s behalf, and should take care not to be associated with the presentation of facts they know or believe to be incorrect or misleading. It also says that when communicating with HMRC, a member should consider making clear how far they are relying on information from the client. If a representation conflicts with other evidence, the letter does not resolve the conflict. Where the client will not correct something the firm believes is wrong, the steps in PCRT on dealing with errors apply, and the firm may need to consider disengaging.

What mistakes do firms make with representation letters?

Using an audit template for an accounts preparation client, so the letter talks about audit evidence and misstatements the firm never assessed.
Asking for a generic confirmation that everything is correct instead of naming the specific facts the work relied on.
Getting the letter signed before the final adjustments, so it does not match the accounts or return that were filed.
Letting one director sign for a board where other directors had their own loan accounts or related party dealings.
Treating the letter as a defence against obvious problems. It records what the client said; it does not excuse the firm from questioning figures that do not make sense.
Failing to keep the signed letter with the working papers, so it cannot be found if HMRC opens an enquiry years later.

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Reviewed by Christine Anderson, Broker, Solar Protect. Last reviewed 19 October 2026. Part of Accountapedia, the Solar Protect guide to UK tax and accounting. This page is general information, not personalised advice.