A new audit practice alert from the International Auditing and Assurance Standards Board aims to help auditors plan more effective use of external confirmations.

External confirmation procedures can be useful for obtaining relevant and reliable evidence for audits of financial statements, the IAASB noted. 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 about the potential issues and help auditors use external confirmation procedures more effectively, the IAASB staff has released Emerging Practice Issues Regarding the Use of External Confirmations in an Audit of Financial Statements. The practice alert highlights areas within the International Standards on Auditing that are relevant when deciding to request external confirmations, designing and carrying out confirmation procedures, and evaluating the responses.

“Requesting external confirmations is a commonly used audit procedure in an audit of financial statements,” said IAASB technical director James Gunn in a statement. “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.”

The alert also aims to raise 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.

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