Document ID: chunk:federal_register_of_legislation:F2021C01273:reg:3:p6
Version: federal_register_of_legislation:F2021C01273
Segment Type: reg
Provision Reference: reg 3 (pt 6/10)
Character Range: 20859–23808

the confirming party to provide information.  A response to a positive confirmation request ordinarily is expected to provide reliable audit evidence.  There is a risk, however, that a confirming party may reply to the confirmation request without verifying that the information is correct.  The auditor may reduce this risk by using positive confirmation requests that do not state the amount (or other information) on the confirmation request, and ask the confirming party to fill in the amount or furnish other information.  On the other hand, use of this type of "blank" confirmation request may result in lower response rates because additional effort is required of the confirming parties.

A6.             Determining that requests are properly addressed includes testing the validity of some or all of the addresses on confirmation requests before they are sent out.

Follow-Up on Confirmation Requests (Ref: Para. 7(d))

A7.             The auditor may send an additional confirmation request when a reply to a previous request has not been received within a reasonable time.  For example, the auditor may, having re-verified the accuracy of the original address, send an additional or follow-up request.

Management's Refusal to Allow the Auditor to Send a Confirmation Request

Reasonableness of Management's Refusal (Ref: Para. 8(a))

A8.             A refusal by management to allow the auditor to send a confirmation request is a limitation on the audit evidence the auditor may wish to obtain.  The auditor is therefore required to enquire as to the reasons for the limitation.  A common reason advanced is the existence of a legal dispute or ongoing negotiation with the intended confirming party, the resolution of which may be affected by an untimely confirmation request.  The auditor is required to seek audit evidence as to the validity and reasonableness of the reasons because of the risk that management may be attempting to deny the auditor access to audit evidence that may reveal fraud or error.

Implications for the Assessment of Risks of Material Misstatement (Ref: Para. 8(b))

A9.             The auditor may conclude from the evaluation in paragraph 8(b) that it would be appropriate to revise the assessment of the risks of material misstatement at the assertion level and modify planned audit procedures in accordance with ASA 315.[14]  For example, if management's request to not confirm is unreasonable, this may indicate a fraud risk factor that requires evaluation in accordance with ASA 240.[15]

Alternative Audit Procedures (Ref: Para. 8(c))

A10.         The alternative audit procedures performed may be similar to those appropriate for a non-response as set out in paragraphs A18-A19 of this Auditing Standard.  Such procedures also would take account of the results of the auditor's evaluation in paragraph 8(b) of this Auditing Standard.

Results of the External Confirmation Procedures

Reliability of