The auditor evaluates the bank’s response to a bank confirmation request, whether electronic or paper-based, and determines whether the response provides relevant and reliable audit evidence, or whether further audit evidence is required.^[19]

The auditor may need to carry out additional audit procedures. For example, it is generally unwarranted for the auditor to place sole reliance on the information obtained through a bank confirmation request to satisfy the completeness assertion. This may be due to various factors such as:

1. other audit procedures indicate doubt as to the completeness of the information provided by the bank;
2. a question on the bank confirmation request remains unanswered by the bank;
3. the auditor considers there is a risk that material accounts, agreements or transactions exist, that have not been disclosed in the bank confirmation;
4. the bank’s disclaimer regarding the information provided; or
5. limitations arising from the bank’s ability to gather all information in respect of an entity’s banking activities.

The auditor may consider performing additional audit procedures to obtain audit evidence over the completeness of information about the entity’s banking activities, including treasury operations. The appropriateness of performing such procedures is dependent on the entity’s circumstances and the assessed level of risk, and may include:

1. requesting separate confirmation of the completeness of the information directly from the entity’s relationship manager at the bank;
2. contacting the bank separately about specific issues of concern;
3. performing additional journal entry test work around cash and disbursements and reviewing cash transactions for unusual flows of funds;
4. asking the entity to include a paragraph in the management representation letter confirming that the bank information is complete;
5. reviewing minutes of meetings where new bank accounts or arrangements may have been agreed; or
6. enquiring of the entity’s treasury department, or other appropriate personnel in the entity, whether they are aware of any additional banking arrangements.

On its own, an oral response to a bank confirmation request does not meet the definition of an external confirmation because it is not a direct written response to the auditor in paper form or by electronic or other medium^[20]. However, upon obtaining an oral response to a bank confirmation request, the auditor may, depending on the circumstances, request the bank to respond in writing directly to the auditor in paper form, or by electronic or other medium. If no such response is received, in accordance with ASA 505,^[21] the auditor seeks other audit evidence to support the information in the oral response.

The auditor may receive a confirmation response containing a disclaimer or restrictive language. Such restrictions do not necessarily invalidate the reliability of the response as audit evidence^[22]. In general, the auditor may reasonably rely upon information given by the bank provided it corroborates the assertions made by management and is not clearly wrong, suspicious, inconsistent in itself, ambiguous, or in conflict with other evidence gathered during the course of the audit, even where the response includes a standard disclaimer of liability.

However, certain restrictive language may cast doubt on the completeness or accuracy of the information contained in the response, or the auditor’s ability to rely on that information. Examples of such restrictive language include statements such as:

1. Information is obtained from electronic data sources, which may not contain all information in the bank’s possession.
2. Information is not guaranteed to be accurate nor current and may be a matter of opinion.
3. The recipient may not rely upon the information in the bank confirmation.

Whether the auditor may rely on the information confirmed and the degree of such reliance depends on the nature and substance of the restrictive language. Where the practical effect of the restrictive language is difficult to ascertain in the particular circumstances, the auditor may consider it appropriate to seek clarification from the bank or seek legal advice.

If restrictive language limits the extent to which the auditor can rely on the bank confirmation response as audit evidence, additional or alternative audit procedures may need to be performed^[23]. The nature and extent of such procedures depends on factors such as the nature of the item being confirmed, the assertion being tested, the nature and substance of the restrictive language, and relevant information obtained through other audit procedures. If the auditor is unable to obtain sufficient appropriate audit evidence through alternative or additional audit procedures, the auditor is required to consider the implications for the auditor’s report in accordance with ASA 705^[24].