Question

There are two parts in a standard bank confirmation.
• Discuss the purposes and what would be requested by each component and to whom it would be sent.

Answer 1

Standard bank confirmation :

The standard bank confirmation is used by auditors to verify financial statements of companies.the content of standard bank confirmation is aligned with the requirements of royal netherlands institute of chartered accountants.

Purpose of standard bank confirmation:

The primary purpose of bank confirmation is to verify the actual cash balance as per bank records.

The auditor's confirm the balance in addition th agreeing the year end bank balance to the bank statement to verify reeconciling items on the client's year end bank reconciliation.Auditors test the bank reconciliation to determine whether client personnel have carefully prepared the bank reconciliation and to verify whether the client's recorded bank balance is the same amount as the actual cash in the bank except for the deposits in transit, outstanding checks and other reconciling items

• To obtain confirmation of all bank balances of the company at the year end
• To ascertain any interest or charges to be accrues at the year end
• To ascertain the existence of any assets held by the bank on client's behalf and whether ant assets have been charged th the bank
• To assist in ascertaining the existence of any contingent liabilities
• To obtain details of all bank accounts which were in existence during the accounting period

Information requested

• The amount of interest charged or credited during the period
• The seperate amounts accrued but not charged or credited of provisional charges and interest
• in case of overdrafts, loan and other facilities state the amount of agreed facilities and repayment terms
• where the account is subject to any restrictions ,this information should be stated
• where the authority upon which you are providing this information does not cover any of the accounts listed ,indicate as appropriate.