Helpsheet to help ICAEW members consider whether as part of an audit they need to obtain bank confirmation(s).
This helpsheet has been issued by ICAEW’s Technical Advisory Service to help ICAEW members consider whether as part of an audit they need to obtain bank confirmation letters.
Although the FRC withdrew Practice Note 16: Bank Reports for Audit Purposes in the United Kingdom, which contained a detailed process auditors were to follow in requesting bank confirmation letters, bank confirmation letters may still be required. When Practice Note 16 was withdrawn, the FRC stated that this was ‘intended to encourage the auditor to apply their professional judgement as to when a confirmation report is required’ and ‘deciding whether a confirmation report is required continues to be a matter of professional judgement for the auditor’. Alongside the withdrawal, changes were made to ISA (UK) 330 The Auditor’s Responses to Assessed Risks and ISA (UK) 505 External Confirmations allowing auditors to potentially adopt a more risk-based approach in determining whether to obtain bank confirmations.
Therefore, an auditor will need to consider the relevant risks, relevant assertions and plan appropriate procedures. Additional considerations are highlighted in ISA (UK) 330 paragraph A50 as follows:
The auditor may determine that external confirmation procedures performed for one purpose provide an opportunity to obtain audit evidence about other matters. For example, confirmation requests for bank balances often include requests for information relevant to other financial statement assertions. Such considerations may influence the auditor’s decision about whether to perform external confirmation procedures. In the UK, depending on the auditor’s risk assessment, the auditor considers whether confirmation is needed in relation to additional information such as trade finance transactions and balances or information about guarantees and other third party securities, in addition to the confirmation of balances and other banking arrangements usually provided in such a request.
Ultimately it is for the auditor to determine whether a bank confirmation letter is needed as an appropriate response to the assessed risks. Where a bank confirmation letter is considered appropriate, such a letter can be obtained through the paid for Confirmation service.
If in doubt seek advice
ICAEW members, affiliates, ICAEW students and staff in eligible firms with member firm access can discuss their specific situation with the Technical Advisory Service on +44 (0)1908 248 250 or via webchat.
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ICAEW cannot accept responsibility for any person acting or refraining to act as a result of any material contained in this helpsheet. This helpsheet is designed to alert members to an important issue of general application. It is not intended to be a definitive statement covering all aspects but is a brief comment on a specific point.
ICAEW members have permission to use and reproduce this helpsheet on the following conditions:
- This permission is strictly limited to ICAEW members only who are using the helpsheet for guidance only.
- The helpsheet is to be reproduced for personal, non-commercial use only and is not for re-distribution.
For further details members are invited to telephone the Technical Advisory Service T +44 (0)1908 248250. The Technical Advisory Service comprises the technical enquiries, ethics advice, anti-money laundering and fraud helplines. For further details visit icaew.com/tas.
- 01 Aug 2018 (12: 00 AM BST)
- First published
- 01 Dec 2021 (12: 00 AM GMT)
- Changelog created, helpsheet converted to new template
- 01 Dec 2021 (02: 40 PM GMT)
- Broken link to pro forma bank letter template replaced with link to Confirmation service.