Audit Execution Top Tips – External Confirmations
External confirmations provide robust third-party evidence over balances within an organisation’s financial statements.
However, all too often a lack of transparency across the confirmations process causes issues in obtaining requested confirmations. This ineffectiveness causes alternative procedures to be required late in the audit process.
As a critical test, the confirmation of bank balances, debt balances and other terms an organisation holds with financial institutions addresses a key risk witnessed in some of the largest accounting frauds. Financial institutions are increasingly requiring audit confirmations to be performed via technology platforms like Confirmation, replacing the traditional mail approach.
Beyond financial institutions, external confirmations can provide strong audit evidence over areas such as receivables, payables and with the legal advisors.
Higher response rates on a more timely basis can now be achieved by technology. Features such as online confirmation and automated follow up mean confirmations are often superior to alternative audit tests. This is particularly true for engagements where customer credit terms extend beyond tight reporting deadlines, impacting post year end procedures.