External confirmation procedures can be a compelling tool in obtaining relevant and reliable evidence for audits of financial statements. Recent experience, however, highlights the need for auditors to pay particular attention to circumstances that may affect the planned use of confirmations, including the risk of fraud and the adequacy of evidence.

To raise awareness of potential issues and to help auditors use external confirmation procedures more effectively, the staff of the International Auditing and Assurance Standards Board (IAASB) has released today a new audit practice alert. Titled Emerging Practice Issues Regarding the Use of External Confirmations in an Audit of Financial Statements, the alert highlights areas within the International Standards on Auditing (ISAs) that are particularly relevant when deciding to request external confirmations, designing and carrying out confirmation procedures, and evaluating responses received. The alert also raises awareness of potential issues that may surface from the increasing use of technology in the confirmation process and the use of restrictive language by respondents.

James Gunn, IAASB Technical Director, explains, “Requesting external confirmations is a commonly used audit procedure in an audit of financial statements. Today’s environment, however, reinforces the need for professional skepticism and professional judgment in all aspects of an audit, including the use of confirmations. The alert reminds auditors of the need to maintain control over the confirmation process, and to remain alert to circumstances that may undermine its effectiveness.”