Page 121 - CA Inter Audit PARAM

CA Ravi Taori
QNO Designing Confirmation Request Old Course -- (P16M)
505.07 Bhaskar CNO SA505.040
What are the factors that are to be considered while designing a confirmation request?
Answer

➢ Factors to be Considered While Designing Confirmation Request: As per SA-505 “External
Confirmations”, the design of a confirmation request may directly affect the confirmation response
rate, and the reliability and the nature of the audit evidence obtained from responses. The following
factors should be considered while designing a confirmation request:-
The assertions being addressed.
Specific identified risks of material misstatement, including fraud risks.
The layout and presentation of the confirmation request.
Prior experience on the audit or similar engagements.
The method of communication.
Management’s authorization to the confirming parties to respond to the auditor. Confirming
parties may only be willing to respond to a confirmation request containing management’s
authorization.
The ability of the confirming party to provide the requested information

All Conditions to be Satisfied to Use Negative Old Course -- (M21E)
QNO Confirmation
505.08 New Course -- (S24M)
Bhaskar CNO SA505.080
CA Rohit is appointed as an auditor of Grace Ltd., he wants to design a suitable Confirmation request letter
for a few debtors of Grace Ltd. As a senior auditor of the firm, explain to him with reference to SA 505
"External Confirmation" all the conditions that should be present to use Negative Confirmation requests
as the sole substantive audit procedure to address an assessed risk of material misstatement at the
assertion level.
OR
CA X is contemplating the use of negative confirmation requests as the sole substantive audit procedure
to verify certain accounts payable balances reflected in financial statements of a company. Which
conditions need to be met to use negative confirmation requests as stated above? Additionally, CA X is of

www.auditguru.in 4.20