External Confirmation (1)

Question 1

What is external confirmation?

Answer 1

Audit evidence obtained as a direct written response to auditor from a third-party (the confirming party), in paper form, or by electronic or other medium

Question 2

What does external confirmation test?

Answer 2

For the existence and rights and obligations of receivables is an external confirmation

Question 3

What does ISA 505 cover?

Answer 3

The confirmation of amounts by third parties, including confirmation of amounts by receivables

Question 4

What does an external confirmation produce?

Answer 4

A written statement from each respondent that amount owed at the date of confirmation is correct

Question 5

Why is the audit evidence obtained?

Answer 5

Reliable since it is from an independent source and in documentary form

Question 6

What must confirmation letter be written on?

Answer 6

Client’s headed paper and signed by client with a copy of the current statement attached

Question 7

What does the confirmation letter request?

Answer 7

The reply be sent directly to the auditor and a prepaid envelope is included for this purpose

Question 8

What are the two types of confirmation request?

Answer 8

Positive and negative confirmation

Question 9

What is a positive confirmation request?

Answer 9

Where confirming party responds directly to auditor, indicating whether they agree with the information in the request or provides requested information

Question 10

What is a negative confirmation request?

Answer 10

Where the confirming party responds directly to the auditor only if they disagree with the information in the request