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An audit confirmation letter is a formal request from an auditor to a third party to verify the accuracy of information provided by the client. It is typically used to confirm the existence of accounts receivable, accounts payable, and other financial information. The four main entities involved in an audit confirmation letter are:
1. The auditor, who sends the letter and requests the confirmation.
2. The client, whose financial information is being audited.
3. The third party, who is asked to confirm the accuracy of the information.
4. The confirmation itself, which is the response from the third party to the auditor.
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Best Structure for Audit Confirmation Letter
An audit confirmation letter is a document sent to third parties to verify the accuracy of information provided by an organization undergoing an audit. Typically, auditors request confirmation from banks, customers, suppliers, and other external parties to corroborate various account balances and transactions.
Components of an Audit Confirmation Letter
- Introduction
- Request for Confirmation
- Specifics of Confirmation
- Additional Information
- Authorization
Introduction
The introductory paragraph provides the recipient with an overview of the audit process and the purpose of the confirmation.
Request for Confirmation
This section clearly states the information being requested for confirmation, such as account balances, transactions, or contractual obligations.
Specifics of Confirmation
- Precisely identify the information being confirmed, including specific account numbers or invoice details.
- Indicate the period or date range for which confirmation is requested.
Additional Information
- Explain the purpose of the audit and how the confirmation information will be used.
- Provide instructions on how to respond, such as by completing an enclosed form or using the recipient’s letterhead.
- Request any supporting documentation or explanations that may be helpful in the audit process.
Authorization
- Include a statement authorizing the recipient to disclose the requested information to the auditor.
- Specify the name of the auditor and the organization they represent.
Sample Audit Confirmation Letter
| Component | Content | Introduction | We are currently conducting an audit of ABC Corporation for the year ended December 31, 2022. | Request for Confirmation | Please confirm the following account balance as of December 31, 2022: | Specifics of Confirmation |
|
Additional Information | The information you provide will be used to verify the accuracy of ABC Corporation’s financial records. | Authorization | We authorize you to disclose the requested information to [Auditor’s Name] of [Audit Firm Name]. |
|---|
Audit Confirmation Letter Samples
Confirmation of Employment
Dear [Auditor’s Name],
This letter is to confirm that [Employee’s Name] has been employed by [Company Name] since [Start Date]. They currently hold the position of [Position] and their annual salary is [Salary].
We understand that this information is required for your audit purposes. Please do not hesitate to contact us if you have any further inquiries.
Thank you for your cooperation.
Sincerely,
[Your Name]
HR Manager
Confirmation of Accounts Receivable
Dear [Auditor’s Name],
This letter is to confirm the following accounts receivable balances as of [Date]:
- Customer A: [Amount]
- Customer B: [Amount]
These balances are correct and represent the amounts owed to us by our customers.
We have attached a detailed schedule of our accounts receivable transactions for your review.
Thank you for your time and consideration.
Sincerely,
[Your Name]
HR Manager
Confirmation of Accounts Payable
Dear [Auditor’s Name],
This letter is to confirm the following accounts payable balances as of [Date]:
- Vendor A: [Amount]
- Vendor B: [Amount]
These balances are correct and represent the amounts we owe to our vendors.
We have attached a detailed schedule of our accounts payable transactions for your review.
Thank you for your time and consideration.
Sincerely,
[Your Name]
HR Manager
Confirmation of Inventory
Dear [Auditor’s Name],
This letter is to confirm the following inventory balances as of [Date]:
- Item A: [Quantity]
- Item B: [Quantity]
These balances are correct and represent the physical inventory we have on hand.
We have attached a detailed inventory list for your review.
Thank you for your time and consideration.
Sincerely,
[Your Name]
HR Manager
Confirmation of Fixed Assets
Dear [Auditor’s Name],
This letter is to confirm the following fixed assets balances as of [Date]:
- Equipment: [Amount]
- Property: [Amount]
These balances are correct and represent the depreciated value of our fixed assets.
We have attached a detailed schedule of our fixed asset transactions for your review.
Thank you for your time and consideration.
Sincerely,
[Your Name]
HR Manager
Confirmation of Liabilities
Dear [Auditor’s Name],
This letter is to confirm the following liabilities balances as of [Date]:
- Accounts Payable: [Amount]
- Notes Payable: [Amount]
These balances are correct and represent the amounts we owe to our creditors.
We have attached a detailed schedule of our liabilities transactions for your review.
Thank you for your time and consideration.
Sincerely,
[Your Name]
HR Manager
Confirmation of Equity
Dear [Auditor’s Name],
This letter is to confirm the following equity balances as of [Date]:
- Share Capital: [Amount]
- Retained Earnings: [Amount]
These balances are correct and represent the ownership interest of our shareholders.
We have attached a detailed schedule of our equity transactions for your review.
Thank you for your time and consideration.
Sincerely,
[Your Name]
HR Manager
What is an Audit Confirmation Letter?
An audit confirmation letter is a formal request from an auditor to a third party, such as a customer, supplier, or bank, to verify the accuracy of information provided by the client.
What information is typically requested in an audit confirmation letter?
An audit confirmation letter typically requests information such as the existence and ownership of assets, the status of accounts payable and receivable, the validity of contingent liabilities, and the completeness of recorded transactions.
What are the benefits of using an audit confirmation letter?
Using an audit confirmation letter can help auditors to:
- Obtain independent verification of information provided by the client.
- Detect fraud or errors in the client’s financial records.
- Increase the reliability of the audit results.
Well, there you have it! I hope this sample audit confirmation letter comes in handy for your next financial audit. If you have any more questions, feel free to reach out to an accountant or other qualified professional. Thanks for reading, and I’ll catch you later!