Characteristics of RespondentsCharacteristics of Respondents

Characteristics of Respondents

32 The reliability of audit evidence provided by a confirmation is affected by the respondent’s competence, independence, authority to respond, knowledge of the matter being confirmed, and objectivity. For this reason, ordinarily the auditor attempts to ensure, where practicable, that the confirmation request is directed to an appropriate individual. For example, when confirming that a covenant related to an entity’s long-term debt has been waived, the auditor directs the request to an official of the creditor who has knowledge about the waiver and has the authority to provide the information.

33 Ordinarily, the auditor assesses whether certain parties may not provide an objective or unbiased response to a confirmation request. Information about the respondent’s competence, knowledge, motivation, ability or willingness to respond may come to the auditor’s attention. Ordinarily, the auditor considers the effect of such information on designing the confirmation request and evaluating the results, including determining whether additional audit procedures are necessary. Ordinarily, the auditor considers whether there is sufficient basis for concluding that the confirmation request is being sent to a respondent from whom the auditor can expect a response that will provide sufficient appropriate audit evidence. For example, the auditor may encounter significant unusual year-end transactions that have a material effect on the financial report, the transactions being with a third party that is economically dependent upon the entity. In such circumstances, ordinarily the auditor considers whether the third party may be motivated to provide an inaccurate response.