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Sequence of steps involved when directly seeking debtors’ confirmation.

Audit evidence can be obtained either through basic accounting records or documents obtained from third parties upon request by the auditor. This technique of obtaining information from the third part is normally referred to as direct confirmation.

The sequence of steps involved in debtors’ circularization process.

(1) Obtain a written permission from management to write the circularization letters,

(2) Write the circularization letters yourself in the client letter heads.

(3) Take a sample of debtors balances from the sales ledger to be circularized.

(4) Have the letters signed by the client officers?

(5) Receive the replied directly from the debtors circularized.

(6) For debtors who have not replied send a second request and telephone the debtor concern.

(7) If the debtor does not respond including the second request have no otherwise except to perform any one of the following:

  • Review the sales ledger and perform listing of the sales invoices to such a debtor.
  • Observe the cut-off procedures of over the sales made by the company to such a debtor.
  • Request the company to provide a provision where the balance cannot be confirmed.
  • Obtain the representation letter from management where the provisions have been provided.
  • Include such non-replies in the management letter presented to the directors.

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