![]() The design of the confirmation request may affect the response rate and the reliability of the information to be obtained, therefore the auditor must be involved in the design of the confirmation request. Where the risk of material misstatement is low and the related controls have been assessed as operating effectively.When there is no reason to suspect that customers are unlikely to respond.However, negative confirmations are only sent Deciding which type of confirmation letter to prepare is a matter of judgement for the auditor. Alternatively, a negative confirmation request only requires the respondent to return the confirmation should there be a disagreement with the information presented. A positive confirmation request requires the respondent to reply by either conforming to the information already provided within the confirmation letter or providing data themselves. The auditor may use positive or negative confirmations or a combination of both. By preparing a confirmation letter, the auditor will be able to confirm the existence and terms and conditions of the related-party balances within the entity being audited. The auditor should also consider confirming balances and terms of significant transactions with related parties such as directors, major shareholders or the ultimate beneficiary owner. Where the entity has any pending litigations, the auditor may send out a confirmation letter to the lawyer to confirm the status of the pending litigation or any form of litigation the audit client may be involved in. By doing so, the auditor will be able to obtain comfort in the quantity and condition of the stock held. ![]() The auditor shall also ascertain if any inventory is held at third parties, this can rightfully be achieved by sending out a confirmation letter. ![]() A payable confirmation letter also provides evidence of any unrecorded liabilities. The auditor may also send out confirmation letters to the audit client’s trade payables, to test the existence, accuracy and valuation assertations. Obtaining debtor confirmations will give the auditor comfort on any potential risks of material misstatement due to fraud or otherwise relating to revenue recognition.
0 Comments
Leave a Reply. |
AuthorWrite something about yourself. No need to be fancy, just an overview. ArchivesCategories |