Question

Describe the auditor’s process for preparing, sending, and receiving responses from legal letters, including at what point during the audit the letters are sent.

Answer 1

Auditors process of preparing, sending, receiving responses from others are external confirmations.

Auditor use this audit procedure to get more and highly reliable audit evidences, on which the auditor's opinion is based.

Auditor mostly use this procedure to confirm some financial balancesim the books of accounts of auditee, and also auditor use this procedure for getting confirmation regarding some decisions taken by management in the preparation and presentation of financial statements.

Most areas where the external confirmations are useful :-

1. examining the balances of accounts payable and accounts receivable

2. Verification of declaration of debts as baddebts

3. Recognition of certain loss like contingent losses and many other cases

There are 2 types of external confirmations those are 1. Positive confirmation letter and 2. Negative confirmation letter.

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