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Bank reports for audit purposes: Points to remember

ICAEW staff and volunteers meet representatives of the main clearing banks and the BBA twice each year to discuss practical issues arising from the previous audit round and any changes being planned to banks’ systems, to ensure that the procedures for obtaining bank reports work as smoothly as possible.

In addition, the representatives maintain regular contact so that urgent issues – such as the postal strikes in late 2009 – can be addressed as they arise.

The group met in April 2010 to discuss the bank report process in the light of December 2009 and March 2010 year end experiences. Some issues are being addressed by banks, but the meeting also identified some points for auditors to bear in mind that will help to make the process run smoothly.

Bank contact details

Auditors are advised to check the address to which to send bank report requests and any special requirements of their client’s bank every time before sending out bank letter requests. A list of bank contact details is available from the BBA website at www.bba.org.uk/policy/audit-reporting. The list gives the address to which requests for bank reports should be sent: practitioners need to be aware that it can take 4 or 5 working days for a request that has been sent to the wrong address, to be re-routed. The BBA contacts list also states whether or not the bank acknowledges auditor requests and, where requests are not acknowledged, gives contact details for auditor enquiries. Banks’ contact details are updated on an ad hoc basis to take current events, as well as changes to banks’ operating systems, into account.

Authority to disclose

A client authority to disclose (ATD) will normally stay in force from year to year unless there is a change of circumstances. However, some banks require a new authority with every request, so auditors need to check the BBA bank contact details list before sending out requests. The ATD must be signed in accordance with the bank (cheque signing) mandate for each and every legal entity covered.

Letterhead

Requests need to be made on the audit firm’s letterhead, so that the banks can check the request back to the ATD as well as the address to which they should direct their reply. For example, when banks accept report requests made by fax, the faxed letter must be on headed (not plain) notepaper.

Main account information

In accordance with revised PN16, the correct sort code and account number need to be given for each and every legal entity included in the report request. If banks receive requests that do not give the account number for the entity in question, or that give incorrect account details, they are entitled to reject the request, unless it is clearly identified as an ‘Incomplete Information’ request, made in special circumstances when the auditor’s knowledge of the business shows such a request to be necessary. If an ‘Incomplete Information’ request is made, it is worth noting that searches for possible relationships or facilities will take longer and the banks may charge their customers an additional fee.

Group Company Audits: legal entity names

Particular care needs to be taken with requests covering groups of companies because, where there are many entities with similar names or abbreviations, it can be very difficult for bank staff to match the correct information to the entity listed in the request. It may on occasion be necessary to include the name and account number of a specific account on which confirmation is needed, if the name is different from that on the main account for the entity. However, the banks accept that this can be a huge task in relation to major organisations (e.g. government departments) and this point will be kept under review and discussed again at the next meeting in September, to avoid undue difficulty or delays for December 2010 year ends.

Timing of requests

Auditors are reminded that requests ought to be sent to banks at least one month before the year end date, and preferably longer at busy periods. A request that is sent to the bank in good time is more likely to receive a timely reply from the bank than one sent a week or less before the year end report date. The acknowledgement process also means that any difficulties such as questions over the ATD can be sorted out before the year end rather than causing delays when the information is needed for the audit.

Fast track requests

Practitioners are reminded that ‘Fast Track’ requests are expected to be exceptional, for circumstances where the audit reporting deadline is very tight. For this reason the audit request form must include the reason(s) for the urgency (see PN16 (Revised) paragraph 29). It is not appropriate to use the Fast Track template to make up time lost by sending the initial bank letter request in late, or to the wrong address, or to submit a standard request and then telephone the bank to ask for the request to be made ‘fast track’. If banks feel that the facility is being abused, they may consider increasing the charge for Fast Track requests to encourage auditors to consider more carefully whether such a request is really necessary.

Acknowledgement process and auditor follow-up

Those banks that acknowledge report requests normally state when they expect to send the reply to the auditor. If they do not, their contact details on the BBA list will include a telephone number for queries, so auditors should be able to check that the report request has been received, and when the bank expects to reply. As indicated in PN16 (Revised) paragraph 27, the banks have stated that chasing replies before the end of the stated processing time serves no purpose except to divert bank staff from the processing itself. If, at the planning stage, auditors see that they will need a reply before, say, the end of the month following the year end, they can ring the bank processing centre to ask what the processing time is likely to be and make a fast track request if they will need the reply sooner.

If auditors centralise their audit letter requests, the requests need to make clear where banks should send their acknowledgement. Where the bank acknowledgement includes a bank processing centre reference, auditors should use this in any follow up with the centre.

General

If auditors have difficulties on individual requests, that cannot be resolved by direct correspondence with the bank concerned, they can ask their professional body for help. The initial contact points for auditor queries are: