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AICPA Standards

AICPA STANDARDS & GUIDANCE RELATED TO CONFIRMATIONS

SAS No. 31: Evidential Matter – It is "presumed that evidential matter obtained from independent sources outside an entity provides greater assurance of reliability than evidence secured solely from within the entity."

SAS No. 67: The Confirmation Process – Asserts that information obtained from third-parties usually provides more relevant and reliable audit evidence than information obtained directly from the client; auditors should control the confirmation process from beginning to end (often overlooked, this includes having the auditor independently validate the contact information of the responder to a confirmation request).

4 Tenants of SAS No. 67

  1. Direct Communication
  2. Professional Skepticism
  3. Respondent is Free from Bias
  4. Maintain Control

SAS No. 80: Amendment to SAS No. 31, Evidential Matter – AU section 319A.63 states: Ordinarily the assessed level of control risk cannot be sufficiently low to eliminate the need to perform any substantive test for significant balances and transaction classes and, the auditor should perform substantive test for such balances and classes regardless of the assessed level of control risk.

SAS No. 99: Consideration of Fraud in a Financial Statement Audit (supersedes SAS No. 82) – Significant features include:

  • Importance of Exercising Professional Skepticism i.e. having the auditor validate the responder to a confirmation request, not just asking the client for a mailing address
  • Required Brainstorming Session to include identifying potential fraud risks and tailoring the audit program accordingly

Practice Alert 2003-1 : Audit Confirmations – Provides the following guidance:

  • Third-party confirmations are important pieces of audit evidence
  • Firms should look for ways to improve the confirmation response rate
  • Reiterates the importance of controlling all aspects of the confirmation process
  • Discourages performing alternative procedures in lieu of confirming balances and information
  • Requires a direct communication through an active response