ICAI advises Bank Auditors to take Third Party Confirmation from Banks directly

ICAI advises Bank Auditors to take Third Party Confirmation from Banks directly

Reetu | Sep 9, 2022 |

ICAI advises Bank Auditors to take Third Party Confirmation from Banks directly

ICAI advises Bank Auditors to take Third Party Confirmation from Banks directly and not from such Vendors providing such services

The Institute of Chartered Accountants of India (ICAI) has recently advised all the bank auditors to take Third Party Confirmation from Banks directly and not from such Vendors providing such services while doing the audit.

External confirmations have been an important and integral part of audit procedure in order to obtain sufficient appropriate audit evidence in line with requirement prescribed in various Standards on Auditing (SAs). Over the years, auditors have been using external confirmations to obtain account balances confirmation from various parties (confirming parties) including banks.

However, it has come to the notice of the Institute of Chartered Accountants of India (ICAI) that, in recent years, auditors are facing various difficulties in obtaining external confirmations from banks. One of the major concern in this regard is that some banks are using services of third-party vendors to provide confirmations on their behalf to auditors. Use of third-party vendors leads to the risk that the information provided by third-party vendors may not be authentic and complete. Further, it is not clear as to who will be responsible in case there is failure of IT controls at the end of third-party vendors which may impact the integrity of information provided.

These elements raise the question of who will be held accountable for the veracity and accuracy of the information provided to auditors—the concerned bank or such third-party vendors. These issues are not currently addressed by any legal framework or regulations. When using the confirmation from such third-party vendors as audit proof, auditors run a major danger of being exposed.

In light of the aforementioned, auditors are urged to directly confirm with the relevant banks.

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