Bank confirmation letter are written correspondence confirming the existence of the account balance and other assets held in the bank. Direct confirmation letters received from banks are considered independent audit evidence helping ensure the existence and completeness of the cash balance and other assets held at the bank.
Similarly, loans and other facilities with the bank are confirmed in the same letter.
Why is bank confirmation considered reliable audit evidence?
The bank confirmation is validated by a financial institution, which is considered a reliable and authentic source of confirmation. Further, the bank is requested to confirm details directly with the auditors. Hence, a higher assurance level can be expected when confirmation is received.
Wrap up
Bank confirmation letter is the written validation paper where the bank confirms/validates the bank balance and other facilities acquired by the entity (audit client). This confirmation is considered highly reliable and authentic as it is authorized by the bank and directly received from the bank.
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