ISA 505 External confirmation

What is external confirmation?

External confirmation is the process of obtaining and determining audit evidence via a third-party representation of information directly.

When auditor has to send it?

Auditor sends the confirmation when they need to verify :

1. Bank balances and other information from bankers.

2. Account receivables and payables balances.

3. Stocks held by third parties at bonded warehouses for processing or on consignment.

4. Property title deeds are held by lawyers or financiers for safe custody or security.

5. Investments purchased from stockbrokers but not delivered at the year ended.

6. Loan from lenders.

When not to use audit confirmation?

1. When examining the debtors’ ability to pay the outstanding balances.

2. When confirming the valuation of goods held on consignment.

3. When defining any unrecorded liabilities from suppliers.

4. When the Information is not adequately addressed by confirmation.

Source:

ISA 505 – External confirmation:

https://www.ifac.org/system/files/downloads/a024-2010-iaasb-handbook-isa-505.pdf

https://www.mia.org.my/v2/downloads/handbook/standards/ISA/2018/06/01/ISA_550.pdf

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