Friday, April 10, 2015

Audit - authenticity of audit confirmations sent to customers or suppliers

For all audit, auditors request for debtors' confirmations, creditors' confirmations when the balances are material for the purpose of the audit.

Upon receipt of confirmations, if the counter-parties do reply - what would you do if the following circumstances happen:
- replies via email to auditors' email account
- replies to audit client, who then pass the confirmations to the auditors
- replies via email to client's email then the email was forwarded by audit client to auditors

Strictly speaking, the original confirmations should be mailed to the auditor with original stamp. This is the procedures / protocol to be reiterated to all audit client, so that they are on the same page from the beginning.

Nevertheless, after noting the above scenarios - what should auditors do ? Is auditor "ok" to accept the above confirmations? We suggest the auditor to carry out some procedures to test the authenticity of this confirmations, by:
- giving a call to counterparties who have replied to confirm that they have replied the amount stated on the confirmation (note down the phone number, name of counterparties);
- test check the email account of the sender by sending an email to them to request for confirmation
- do a high level reasonableness test on the sales or purchase trend with this particular customer or supplier

From an audit perspective, some additional procedures need to be carried out to gain more comfort on the confirmations received. Maintain professional skepticism throughout the audit.

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