Confirmation is the process of obtaining and evaluating a direct communication from a third party in response to a request for information about a particular item affecting financial statement assertions. The process includes— Selecting items for which confirmations are to be requested.
What is a positive confirmation request?
(b) Positive confirmation request – A request that the confirming party respond directly to the auditor indicating whether the confirming party agrees or disagrees with the information in the request , or providing the requested information.
What is audit confirmation request?
Audit confirmations are used when:
Auditors often send paper or electronic requests to customers to verify accounts receivable and to other financial institutions to confirm outstanding promissory notes .
What are the different forms of confirmation request?
The three types of confirmation forms are positive confirmation, blank confirmation forms, and negative confirmation . Negative confirmation is best applied when the risk of material misstatement is low, meaning that inherent risk and control risk are relatively low.
Under which audit test do confirmations fall?
The auditor uses the audit risk assessment in determining the audit procedures to be applied, including whether they should include confirmation. . 06 Confirmation is undertaken to obtain evidence from third parties about financial statement assertions made by management.
What is the difference between a positive confirmation and a negative confirmation?
While positive confirmation requires supporting information despite the accuracy of the original records, negative confirmation requires a response only if there is a discrepancy .
What are the characteristics of a confirmation?
- Receipt.
- Written or oral response.
- From independent third party.
- Requested by the auditor.
What is silent confirmation of letter of credit?
A silent confirmation, is a confirmation, issued to the beneficiary of a letter of credit , by which the silent confirmation bank undertakes to pay the beneficiary (thereby the beneficiary gains assurance of payment if for some reason the issuing bank refuses or cannot pay under the letter of credit (e.g. due to court ...
What is a negative confirmation request when is this type of confirmation necessary?
Negative confirmation is a letter or document requesting that the recipient should only respond to the sender if there were an issue with the contents of the message or the recipient wanted to opt-out of the event that the letter had addressed .
What are synonyms for confirm?
- affirm.
- back.
- certify.
- explain.
- sign.
- substantiate.
- uphold.
- verify.
What are the circumstances under which confirmation of accounts receivable is not required?
RECEIVABLE CONFIRMATIONS ARE NOT ALWAYS required if accounts receivable are immaterial, the use of confirmations would be ineffective or combined inherent risk and control risk are low and analytics or other substantive tests would detect misstatements .
Why is a formal confirmation important?
Confirmation can be an effective tool for obtaining auditing evidence for some claims related to financial statements like existence claims if it is prepared and used properly. ... For instance, the evidences related to receivable accounts balances can provide us with convincing evidence about existence claims.
Are bank confirmations required for an audit?
The auditor will send a bank confirmation letter to each of the banks , in which the accounts are held, to confirm whether the balances reported by the management of the auditee business, in the financial statements of the business, are correct. The bank confirmation letter is sent from an auditor directly to the banks.
What are the two types of audit tests?
- 1- Audit Substantive tests.
- 2- Risks Assessment tests.
- 3- Tests of Detailed Balances.
- 4- Dual Purpose Tests.
- 5- Analytical procedure tests.
What are the three types of substantive test?
The three types of substantive tests are analytical procedures, a test of details of transactions, and tests of details of balances .
How do you test for control?
- Reperformance. Auditors may initiate a new transaction, to see which controls are used by the client and the effectiveness of those controls .
- Observation. Auditors may observe a business process in action, and in particular the control elements of the process.
- Inspection.
