A beginner’s guide to understanding your audit – Part 2: Sending confirmations
HLB Berman Fisher
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During your audit, your auditor may request permission to send direct independent confirmations to your company’s/ Fund’s banks and brokers. Confirmations from independent third parties on balances held at year-end provide a high level of evidence for the balances being audited.
Your auditor will ask your bank to return the confirmation directly to them which shows each account and the cash held within each account.?Your auditor will ask your broker to return the confirmation directly to them which shows a list of investments held and the quantities held.
Recently more and more funds are investing in private equity. Your auditor will likely request to send a confirmation to each investee company asking the investee to confirm the quantity held by the fund. The confirmation may also ask for the company’s latest stock price from any share sales as well as ask for a copy of the audited or unaudited accounts of the underlying investee firm if available.
Helping your auditor follow up on confirmations can be helpful and lead to getting the confirmations returned back quicker. The importance and value of directly obtained independent third-party confirmations cannot be overlooked and is a crucial part of the audit.?