ISA 505 “External Confirmation” deals with the auditor’s use of external confirmation procedures to obtain audit evidence.
ISA 505 defined external confirmation as audit evidence obtained as a direct written response to the auditor from a third party (the confirming party). In paper form or by electronic or other media.
Process of obtaining external conformation:
- Determining the information to be confirmed or requested: it may be with respect to
- Account balance & their elements.
- Terms of agreements/ contracts/ transactions.
- Selecting the appropriate confirming party
- Designing the confirmation requests: It also includes determining that requests are properly addressed, and contain return information for responses to be sent directly to the auditor.
- Sending the requests, including follow-up requests when applicable, to the confirming part.