What additional information is included with a standard bank confirmation?
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Standard bank confirmations seek information on client account balances and on the existence of loans, due dates of loans, interest rates, dates through which interest has been paid, and collateral for all loans outstanding at year end.Click to see full answer. Also question is, what is a standard bank confirmation?Standard Bank Confirmation. The Standard Bank Confirmation is used by auditors to verify financial statements of companies. The content of the Standard Bank Confirmation is aligned with the requirements of the Royal Netherlands Institute of Chartered Accountants (NBA).Also, are bank confirmations required for an audit? (1)For cash balances, there is no requirement shown in the auditing standards which means confirmation in audit of cash balances is not a must. But in fact, it is performed in most audits. (2)As for accounting receivables balances, it is required by the auditing standards to use confirmations. Keeping this in view, what are bank confirmations? A bank confirmation letter (BCL) is a letter from a bank or financial institution confirming the existence of a loan or a line of credit that has been extended to a borrower.How do you audit cash and bank balances?The primary audit procedure used in testing cash balances is confirmation. In order to test confirmation, auditors ask the company’s bankers to verify the balance of the bank accounts directly; responses are sent solely to the auditors. Bankers require electronic confirmation requests. Show
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Rabobank Wholesale offers the service of providing a Standard Bank Confirmation, which is used by external auditors to verify their client’s financial statements. The content of the Standard Bank Confirmation is aligned with the requirements of the Royal Netherlands Institute of Chartered Accountants (NBA) and the Dutch Banking Association (NVB). 1 Application via an authorised representativeVia an authorised representative a request can be submitted to provide an external auditor with a Standard Bank Confirmation (SBC). A separate request needs to be submitted for each legal entity that has a relationship with the bank. 2 How to apply for a Standard Bank ConfirmationThe auditor can now request the client authorisation and the SBC directly through Confirmation, resulting in swift handling of the audit confirmation process. Confirmation is an established platform servicing on a global level a wide range of auditors. They offer a secure and reliable online service to exchange confidential information The auditor can register for the service at www.confirmation.com in a few simple steps. For further questions or any queries, please contact the Confirmation customer support: [email protected] or with the Territory Manager Anastasia Schuster: [email protected] Rabobank Wholesale clients can use the application form to apply for the Standard Bank Confirmation via email. The information must be provided in full and truthfully by the persons authorised in your organisation. Once the requested documents have been processed, the requested Standard Bank Confirmation will be send to you and your external auditor. We will do our utmost to process your application within 15 working days after the reference date. When a request is raised with a reporting date in the future, the request will be processed within 15 working days after passing this date. Please send the application form to: [email protected] 3 How to apply for a Standard Bank Confirmation for local bank clientsLocal bank clients will have to contact their local bank to apply for a Standard Bank Confirmation. 4 FeesThe following fees are payable for the application of a Standard Bank Confirmation*:
*All prices are excluding 21% Dutch VAT. The fees related to the requested Standard Bank Confirmation(s) will be debited from your EURO account. In case you do not hold an account with Rabobank you can find the SEPA Direct Debit Mandate (EURO) on the back of the Standard Bank Confirmation application form. A non-Euro payment can be effected after receipt of the invoice according the payment instructions as stated on the invoice. In this article, we will cover the bank confirmation. As part of the audit procedures for cash and bank, the bank confirmation letter is really important to ensure the existent and completeness. Before going in detail, let’s go through the overview and some key definition. As you may be aware of, the external auditors of an auditee business perform many procedures to verify certain assertions regarding the financial statements of the business. These assertions are different for balances and class of transactions. The auditors also gather audit evidence regarding their procedures to form an opinion regarding the financial statements. For classes of transactions and events and related disclosures, the assertions tested are occurrence, completeness, accuracy, cut-off, classification, and presentation. For account balances and related disclosures, the assertions tested are existence, rights and obligations, completeness, accuracy, valuation and allocation, classification, and presentation. When it comes to bank accounts, the assertions tested by the auditor relate to account balances and related disclosures. A business can have many bank accounts with different banks. It is the job of an auditor to identify all the bank accounts of the business and test the relevant assertions of the balances. Usually, the management of a business will provide a list of bank accounts and their balances to the auditors and the auditors have to perform audit procedures on these bank balances. With bank balances, auditors perform lesser audit procedures to obtain sufficient appropriate audit evidence as compared to other balances. The two main audit procedures that auditors carry out on bank balances are obtaining bank confirmations and bank reconciliations. Table of contentsDefinitionA bank confirmation is a written confirmation sent by the auditor to all the banks in which an auditee business holds accounts. During an audit, the management of the auditee business will provide their auditors with a list of all bank balances that are reported in the financial statements of a business. The auditor will send a bank confirmation letter to each of the banks, in which the accounts are held, to confirm whether the balances reported by the management of the auditee business, in the financial statements of the business, are correct. The bank confirmation letter is sent from an auditor directly to the banks. The management of the auditee business will authorize the bank to provide the auditors with the requested information. This letter requests the banks to confirm the bank account balances of the business for each bank relatively. It also requests for other information such as the type of account, account number, type of currency, overdraft balances. The bank confirmation is also used to gather any other information related to the bank accounts of the business. They may be used to confirm the closure of an account with a bank. Similarly, it can be used to request the bank for any accrued charges or accrued incomes on the bank accounts, such as interest, markups, etc. that have not been yet debited or credited to the account. It is also used to request for information related to any other facilities that the bank may provide the business, such as loans, overdraft facilities, etc. and their details for disclosure purposes. The bank confirmation can also be used to confirm any contingent liabilities for disclosure as well. READ: 8 Types of Audit Evidence: All You Should Know! Why is Bank Confirmation Important?Bank confirmations are the most reliable type of audit evidence that auditors can obtain with regards to the existence, rights and obligations, and valuation and allocation assertions regarding bank account balances in the financial statements. This is mainly because bank confirmations are recognized by the International Standards on Auditing as a more reliable form of audit evidence. According to ISA 500 – ‘Audit Evidence’, audit evidence obtained from external independent sources are more reliable as compared to audit evidence obtained from the management of the auditee business. Similarly, the standard suggests that audit evidence obtained directly by the auditor is more reliable as compared to audit evidence obtained through the involvement of the management of the business. Furthermore, the standard suggests that audit evidence in documented form is more reliable than audit evidence obtained verbally or orally. Finally, the standard also states that audit evidence obtained in original form is more reliable as compared to other forms, such as photocopies, filmed documents, digitized documents, etc. A bank confirmation meets all the criteria above for reliable information. It is sent by the bank directly to the auditor, thus making it direct form of evidence. Similarly, it is received in a written form which makes them a more reliable form of audit evidence as compared to evidence obtained orally or verbally. Finally, the evidence is obtained in its original form and not digitally or as a photocopy, thus, making it better from the other forms of audit evidence that are not obtained in their original forms, such as contracts or agreements. Bank confirmation is also important because they can be used to confirm other areas of the financial statements, such as accrued interests, markups, etc. and their relative charges in the Statement of Profit or Loss. Similarly, it can also be used to confirm other facilities that a bank provides to the business which helps confirm the disclosures within the financial statements. These disclosures can also be confirmed by inspecting the agreements or contracts with the bank. However, bank confirmation will reflect the latest status of the agreement or contracts. All of the above reasons make it an important part of the audit process when it comes to performing audit procedures regarding bank account balances and any related disclosures. Bank Confirmation Process and Procedure for AuditorBank confirmation is one of the audit procedures for cash and bank. The bank confirmation process and procedure are simple for auditors. The auditor is generally provided with a list of all bank accounts from the management of the auditee business. The list includes any new accounts opened or closed during the period along with the regular bank accounts of the business reported in its financial statements. For existing auditors of a business, the auditors can also compare the list with the list of bank accounts of the business from the previous accounting period to see if there are any changes in the list of bank accounts. READ: Value for Money Audits (VFM) Once a list of bank accounts has been obtained from the management, the auditor will draft bank confirmation letters for every bank in which accounts are held. For banks in which the business holds more than one account, the auditor will only send one bank confirmation. Once it is drafted, the auditors will obtain some form of authorization from the management of the business to authorize the bank to disclose the required information. If the management does not authorize the bank to disclose information, the bank will not reply to the bank confirmation letters even if the auditors send the confirmations. Usually, a cover letter is sent along the bank confirmation letter that is also signed by an authorized person within the management to authorize the bank. Once the bank confirmation letters and authorization are finalized, they are sent to the banks. The letters require the banks to directly reply to the auditors at the auditor’s provided address. After a while, the bank will send a reply of such letters with the required information. The auditors then compare the information provided by the bank with the information disclosed within the financial statements. Any differences between the information in the confirmation and the financial statements are discussed with the management. However, the information and disclosures within the bank confirmation are considered more reliable than information provided by the management. Are there any Alternative Options if Bank Confirmation Cannot Be Obtained?When a bank confirmation cannot be obtained, auditors will have to carry out alternative procedures to obtain sufficient appropriate audit evidence regarding the bank accounts of the business. However, it cannot be truly replaced by alternative options. The auditor will also need to consider the reason why the bank confirmation cannot be obtained. Sometimes the management of the auditee business may stop the auditor from obtaining bank confirmation. As mentioned above, bank confirmation needs the management of the auditee business to authorize the bank to provide the information. However, if the management refuses to do so or refuse to allow the auditor from obtaining the external confirmation, the auditor will have to check the reasonableness of the management’s refusal for doing so. The management may have a valid reason for refusing to allow the auditor such as legal disputes with the banks, etc., although, these are highly unlikely. The auditor will have to gather audit evidence regarding the validity of the management’s reasons. Whether the management refuses to allow the auditor to contact the bank or the bank confirmation cannot be obtained for any other reason, the auditor will have to perform alternative procedures. These will include reassessing the risks of material misstatement of the bank balances and adjusting the audit procedures accordingly. Similarly, the auditor can also perform subsequent analysis of the bank accounts. This will include checking the subsequent transactions in the bank account. Auditors can also select a sample of transactions in the respective bank and check if all the related documents, such as copies of cheques, authorizations, etc. are complete. READ: What is Sampling Risk in Audit? For alternative procedures regarding the disclosures obtained from the bank confirmation, such as, disclosures regarding facilities, loans, etc., the auditor can inspect the original agreements or contracts with the relevant banks for the relative facilities to confirm the disclosures from them. The auditor may also inquire the management of the business for any changes in the agreement and obtain audit evidence to support any changes in the original agreements. However, as mentioned above, bank confirmations are the most reliable form of audit evidence when it comes to bank balances. It cannot be completely replaced by any alternative options. If the auditor perceives the risk of material misstatement related to the bank balances of a business to be high, the auditor can also consider modifying their report to compensate for the inability to obtain bank confirmations. Limitation of Bank ConfirmationThe limitations of bank confirmations come from their reliance on the management of the business. As mentioned above, the management of the business needs to authorize the bank to provide the auditor with information. If the management refuses to authorize the bank, the auditor cannot use bank confirmations as an audit procedure. The refusal may come due to different reasons which will need to be confirmed by the auditors. Auditors will also need to perform alternative audit procedures in that case. Similarly, auditors need a list of all bank accounts of a business to send bank confirmations to all the banks in which accounts are held. If the list is incomplete, then the auditors cannot find any omitted banks using a bank confirmation. For example, if the management of the business intentionally omit a bank account from the list given to the auditors, bank confirmations cannot be sent and, thus, these accounts cannot be detected. While omitting banks from the list of bank balances may require some creative accounting, bank accounts that do not have any transactions or balance but provide the business with facilities cannot be easily detected. ConclusionA bank confirmation is the most important audit evidence when it comes to auditing the bank balances of an organization. The bank confirmation is sent by the auditors to each bank that the auditee business has an account in. The bank confirmation is then sent back to the auditors by the bank with information regarding bank balances, facilities, loans, contingent liabilities or any other bank related information related to the business. While alternative procedures can be used incase a bank confirmation cannot be obtained, these audit procedures cannot fully replace the bank confirmation as an audit evidence. Bank confirmations are mainly limited by their reliance on the management of the business. What information is included with a standard bank confirmation?The standard bank confirmation provides an overview of all of an organisation's banking affairs. This includes any current accounts, savings accounts and/or investment accounts that the organisation holds with ING Bank N.V., but also any credit facilities or mandates held by representatives and authorised persons.
What are the two parts of a standard bank confirmation?The standard bank confirmation form now consists of two parts. The first general (compulsory) part contains three questions that must be answered by the bank in all cases. This is followed by the second part containing five specific questions, which the bank should only answer at the explicit request of the client.
What is the primary purpose of a bank confirmation?Confirmation is undertaken to obtain evidence from third parties about financial statement assertions made by management. See paragraph 8 of Auditing Standard No. 15, Audit Evidence, which discusses the reliability of audit evidence.
What is bank confirmation request?02 "Bank confirmation request" means a request of a bank to provide independent confirmation for audit purposes of such information as the entity's account balances, securities, treasury management instruments, documents and other related information held by the bank on behalf of the entity.
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