The External Confirmation ProcessThe External Confirmation Process

The External Confirmation Process

34 When performing confirmation procedures, the auditor shall maintain control over the process of selecting those to whom a request will be sent, the preparation and sending of confirmation requests, and the responses to those requests.

35 Control is maintained over communication between the intended recipient and the auditor to minimise the possibility that the results of the confirmation process will be biased because of the interception and alteration of confirmation requests or responses. Under paragraph 34 of this Auditing Standard, the auditor needs to ensure that it is the auditor who sends out the confirmation requests, that the requests are properly addressed, and that it is requested that all replies are sent directly to the auditor. The auditor ordinarily considers whether replies have come from the purported sender.

No Response to a Positive Confirmation Request

36 The auditor shall perform alternative audit procedures where no response is received to a positive external confirmation request. The alternative audit procedures shall be such as to provide audit evidence about the assertions that the confirmation request was intended to provide.

37 Where no response is received, the auditor ordinarily contacts the recipient of the request to elicit a response. Where the auditor is unable to obtain a response, under paragraph 36 of this Auditing Standard, the auditor needs to use alternative audit procedures. The nature of alternative audit procedures varies according to the account and assertion in question. In the examination of accounts receivable, alternative audit procedures may include examination of subsequent cash receipts, examination of shipping documentation or other client documentation to provide audit evidence for the existence assertion, and examination of sales near the period-end to provide audit evidence for the cut-off assertion. In the examination of accounts payable, alternative audit procedures may include examination of subsequent cash disbursements or correspondence from third parties to provide audit evidence of the existence assertion and examination of other records, such as goods received notes, to provide audit evidence of the completeness assertion.

Reliability of Responses Received

38 Ordinarily, the auditor considers whether there is any indication that external confirmations received may not be reliable. Ordinarily, the auditor considers the response’s authenticity and performs audit procedures to dispel any concern. The auditor may choose to verify the source and contents of a response in a telephone call to the purported sender. In addition, the auditor, under paragraph 34 of this Auditing Standard, needs to request the purported sender to mail the original confirmation directly to the auditor. With ever-increasing use of technology, the auditor ordinarily considers validating the source of replies received in electronic format (for example, fax or electronic mail). Under ASA 230 Audit Documentation, the auditor needs to document oral confirmations in the work papers. If the information in the oral confirmations is significant, the auditor ordinarily requests the parties involved to submit written confirmation of the specific information directly to the auditor.