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CA Intermediate · Auditing and Ethics · Audit Evidence

Auditor of Sundaram Pharma Ltd receives a bank confirmation directly from the bank by e-mail in response to a request sent by the auditor. The e-mail arrives from a domain that looks slightly different from the bank's known domain, and the sender cannot be verified. Under SA 505 on External Confirmations, what is the most appropriate response?

The auditor should verify the authenticity of the response, for example by contacting the bank through a known channel, and treat it as unreliable until verified. SA 505 requires further evidence on reliability when doubt exists about the source, even if the response came directly to the auditor.

  1. AVerify the authenticity of the response, for example by contacting the bank through a known channel, and treat it as unreliable until verifiedCorrect
  2. BAccept it because it was received directly by the auditor, not through the client
  3. CDisregard the confirmation and rely only on the client's bank reconciliation
  4. DAsk the client's accountant to forward the original bank statement as a substitute

Explanation

SA 505 requires the auditor to obtain evidence about the reliability of a response when doubt exists about its source, for instance by contacting the purported sender. Receipt directly by the auditor does not remove doubt about authenticity. Relying on client-prepared documents is weaker evidence than a verified external confirmation.

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