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An audit confirmation letter is a request for written confirmation from a third-party entity regarding the accuracy of financial information. Auditors use these letters to verify information obtained from their clients. The letter is addressed to the third-party entity, who is usually a bank, broker, or other financial institution. The auditor requesting the confirmation is the sender, and the third-party entity responding to the request is the receiver. Confirmation letters are an important part of the audit process, as they provide independent evidence to support the accuracy of the financial information being audited.
Audit Confirmation Letter Structure
An audit confirmation letter is a key part of the financial audit process, as it helps to verify the accuracy of the company’s financial statements. The letter should be clear and concise, and should request specific information from the recipient.
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Content of the Letter
The letter should include the following information:
* The name of the company being audited
* The period being audited
* The name of the recipient
* The specific information being requested
* The date by which the information is needed
Structure of the Letter
The letter should be organized into the following sections:
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The first paragraph should identify the company being audited and the period being audited.
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The second paragraph should state the purpose of the letter and the specific information being requested.
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The third paragraph should specify the date by which the information is needed.
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The fourth paragraph should include a closing statement, such as “Thank you for your cooperation” or “We appreciate your assistance in this matter.”
Example Letter
The following is an example of an audit confirmation letter:
[Company Name] [Address] [City, State, Zip Code] [Phone Number] [Email Address] [Date]
[Recipient Name]
[Recipient Address]
[Recipient City, State, Zip Code]Dear [Recipient Name],
This letter is to request your assistance in our audit of [Company Name] for the period ending [End Date].
As part of our audit, we are required to confirm the following information:
* Accounts receivable
* Accounts payable
* Inventory
* Fixed assetsWe would appreciate it if you could provide us with the following information by [Date].
* A list of your accounts receivable as of [End Date], including the customer name, invoice number, invoice date, invoice amount, and outstanding balance.
* A list of your accounts payable as of [End Date], including the vendor name, invoice number, invoice date, invoice amount, and outstanding balance.
* A list of your inventory as of [End Date], including the item description, quantity on hand, and unit cost.
* A list of your fixed assets as of [End Date], including the asset description, acquisition date, acquisition cost, and accumulated depreciation.Thank you for your cooperation. We appreciate your assistance in this matter.
Sincerely,
[Your Name]
Audit Confirmation Letter Samples
Example 1: Verification of Bank Balances
Dear [Bank Name],
We are writing to request your cooperation in the audit of our company, [Company Name], for the year ended [Date]. We understand that [Bank Name] is our designated financial institution.
Kindly verify the following information as of [Date]:
- Account numbers: [list of account numbers]
- Account balances: [list of account balances]
- Any outstanding loans or overdrafts
- Any other relevant information
Please provide the requested information directly to our external auditors, [Auditor Name], at [Auditor Address and Contact Information].
Your prompt attention to this matter is greatly appreciated.
Example 2: Confirmation of Accounts Payable
Dear [Vendor Name],
As part of the audit of our company, [Company Name], for the year ended [Date], we are seeking confirmation of your records regarding our accounts payable balance.
Please review the following information and respond with any necessary adjustments:
- As of [Date], we believe our balance payable to [Vendor Name] is [Amount]
- Any invoices that were issued after [Date] but not recorded in our system
- Any credits or discounts that have not been applied
- Any other adjustments that may be necessary
Please provide your response directly to our external auditors, [Auditor Name], at [Auditor Address and Contact Information].
Thank you for your cooperation.
Example 3: Verification of Fixed Assets
Dear [Fixed Asset Custodian],
We are writing to request an inventory and condition assessment of all fixed assets under your custodianship for the audit of our company, [Company Name], for the year ended [Date].
Please provide the following information:
- A complete list of all fixed assets in your possession
- The original acquisition cost and current estimated fair value for each asset
- The condition of each asset, including any repairs or maintenance needed
- Any assets that have been disposed of or moved since the last audit
Please coordinate with our external auditors, [Auditor Name], at [Auditor Address and Contact Information] to schedule an inventory and inspection.
Thank you for your assistance.
Example 4: Confirmation of Contingent Liabilities
Dear [Legal Counsel],
In connection with the audit of our company, [Company Name], for the year ended [Date], we are requesting your confirmation regarding any potential contingent liabilities.
Please review our records and provide information on the following:
- Any pending lawsuits or legal proceedings
- Any guarantees or endorsements that have been issued
- Any other contingent obligations or commitments
Please provide your response directly to our external auditors, [Auditor Name], at [Auditor Address and Contact Information].
Your prompt attention to this matter is greatly appreciated.
Example 5: Verification of Internal Control Procedures
Dear [Internal Audit Department],
As part of our external audit of [Company Name] for the year ended [Date], we are requesting a review and evaluation of the company’s internal control procedures.
Please provide us with the following information:
- A description of the key internal control procedures in place
- An assessment of the effectiveness of these procedures
- Any recommendations for improvements or enhancements
Your assistance in this matter will be greatly appreciated.
Example 6: Confirmation of Information Technology Controls
Dear [IT Manager],
We are requesting your cooperation in our audit of [Company Name] for the year ended [Date], specifically regarding the company’s information technology (IT) controls.
Please provide us with the following information:
- A description of the IT controls in place
- An assessment of the effectiveness of these controls
- Any vulnerabilities or areas of concern that have been identified
Your assistance in this matter is greatly appreciated.
Example 7: Confirmation of Insurance Coverage
Dear [Insurance Agent],
We are writing to request a confirmation of our insurance coverage as of [Date] in connection with our audit of [Company Name] for the year ended [Date].
Please provide us with the following information:
- A copy of the current insurance policy
- A summary of the coverage limits and exclusions
- Any claims that have been filed or paid
Please provide your response directly to our external auditors, [Auditor Name], at [Auditor Address and Contact Information].
Thank you for your assistance.
What is an Audit Confirmation Letter?
An audit confirmation letter is a formal request for an outside party to verify the accuracy of information provided by a company being audited. The purpose of the letter is to obtain independent evidence that supports the financial statements being reviewed.
Subject: Audit Confirmation Letter
Predicate: Is a formal request for an outside party to verify the accuracy of information provided by a company being audited.
Object: Independent evidence that supports the financial statements being reviewed.
When is an Audit Confirmation Letter Used?
Audit confirmation letters are typically used in the following situations:
- To verify the existence and ownership of cash balances
- To confirm the details of accounts receivable and payable
- To obtain information about contingent liabilities
- To gather evidence about the company’s compliance with laws and regulations
Subject: Audit confirmation letters
Predicate: Are typically used in the following situations:
Object:
- Verify the existence and ownership of cash balances
- Confirm the details of accounts receivable and payable
- Obtain information about contingent liabilities
- Gather evidence about the company’s compliance with laws and regulations
Who Prepares an Audit Confirmation Letter?
Audit confirmation letters are typically prepared by the auditor of the company being audited. The auditor will send the letters to third parties who have knowledge of the company’s financial transactions.
Subject: Audit confirmation letters
Predicate: Are typically prepared by the auditor of the company being audited.
Object: The auditor will send the letters to third parties who have knowledge of the company’s financial transactions.
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