Question

(1) Auditors send bank confirmations for most active bank accounts. Are bank confirmations required under AICPA or PCAOB auditing standards? How does this compare to the requirements for confirmation of accounts receivable?

(2) Bank confirmations are often sent eletronically using a third-party intermediary. The auditor transmits the request to the intermediary, which then transmits the request to the bank. What are the advantages of using third-party to send confirmations electronically?

(From audit practice case Assignment 8)

Answer 1

1.

When facing the audits of cash balances and accounts receivables balances, the requirements of the use of confirmations are different. For cash balances, there is no requirement shown in the auditing standards which means confirmation in audit of cash balances is not a must. But in fact, it is performedin most audits.

2.Advantages of Electronically Using Third party

• Get information on your client when the responding party won’t complete a confirmation request.
• Fast and easy.
• More secure than traditional paper-based confirmations.
• Tools to instantly track the status of outstanding alternative procedure requests.
• Reduced paper waste.