Document ID: chunk:federal_register_of_legislation:F2021C01273:reg:3:p8
Version: federal_register_of_legislation:F2021C01273
Segment Type: reg
Provision Reference: reg 3 (pt 8/10)
Character Range: 26293–29417

entity rather than to the auditor), the auditor may request the confirming party to respond in writing directly to the auditor.

A15.         On its own, an oral response to a confirmation request does not meet the definition of an external confirmation because it is not a direct written response to the auditor.  However, upon obtaining an oral response to a confirmation request, the auditor may, depending on the circumstances, request the confirming party to respond in writing directly to the auditor.  If no such response is received, in accordance with paragraph 12, the auditor seeks other audit evidence to support the information in the oral response.

A16.         A response to a confirmation request may contain restrictive language regarding its use.  Such restrictions do not necessarily invalidate the reliability of the response as audit evidence.

Unreliable Responses (Ref: Para. 11)

A17.         When the auditor concludes that a response is unreliable, the auditor may need to revise the assessment of the risks of material misstatement at the assertion level and modify planned audit procedures accordingly, in accordance with ASA 315.[18]  For example, an unreliable response may indicate a fraud risk factor that requires evaluation in accordance with ASA 240.[19]

Non-Responses (Ref: Para. 12)

A18.         Examples of alternative audit procedures the auditor may perform include:

           * For accounts receivable balances – examining specific subsequent cash receipts, shipping documentation, and sales near the period-end.

           * For accounts payable balances – examining subsequent cash disbursements or correspondence from third parties, and other records, such as goods received notes.

A19.         The nature and extent of alternative audit procedures are affected by the account and assertion in question.  A non-response to a confirmation request may indicate a previously unidentified risk of material misstatement.  In such situations, the auditor may need to revise the assessed risk of material misstatement at the assertion level, and modify planned audit procedures, in accordance with ASA 315.[20]  For example, fewer responses to confirmation requests than anticipated, or a greater number of responses than anticipated, may indicate a previously unidentified fraud risk factor that requires evaluation in accordance with ASA 240.[21]

When a Response to a Positive Confirmation Request Is Necessary to Obtain Sufficient Appropriate Audit Evidence (Ref.  Para.  13)

A20.         In certain circumstances, the auditor may identify an assessed risk of material misstatement at the assertion level for which a response to a positive confirmation request is necessary to obtain sufficient appropriate audit evidence.  Such circumstances may include where:

           * The information available to corroborate management's assertion(s) is only available outside the entity.

           * Specific fraud risk factors, such as the risk of management override of controls, or the risk of collusion which can involve employee(s) and/or management, prevent the auditor from