Presentation is loading. Please wait.

Presentation is loading. Please wait.

Electronic Confirmation Process edu.Confirmation.com Simply Soups Inc. Background and Case Introduction 1 © 2013 Dr. Denise Hanes, Dr. Barbara Porco, and.

Similar presentations


Presentation on theme: "Electronic Confirmation Process edu.Confirmation.com Simply Soups Inc. Background and Case Introduction 1 © 2013 Dr. Denise Hanes, Dr. Barbara Porco, and."— Presentation transcript:

1 Electronic Confirmation Process edu.Confirmation.com Simply Soups Inc. Background and Case Introduction 1 © 2013 Dr. Denise Hanes, Dr. Barbara Porco, and Dr. Jay Thibodeau Used with Permission. All rights reserved.

2 Session ONE Case Study Kick-off 2 © 2013 Dr. Denise Hanes, Dr. Barbara Porco, and Dr. Jay Thibodeau Used with Permission. All rights reserved.

3 Objectives: To develop critical think skills by identifying risks in the confirmation process To evaluate the persuasiveness of confirmation responses and recognize alternative audit procedures for confirmations Audit Objectives Practical Objectives Regulatory Objectives Technical Objective To utilize an electronic confirmation platform To understand the proposed confirmation standard To understand the audit documentation standard To understand the steps necessary to evaluate a third party intermediary’s control environment 3 © 2013 Dr. Denise Hanes, Dr. Barbara Porco, and Dr. Jay Thibodeau Used with Permission. All rights reserved.

4 Audit evidence obtained as a direct written response to the auditor from a third party in paper form, or by electronic or other medium. ” “ 4 © 2013 Dr. Denise Hanes, Dr. Barbara Porco, and Dr. Jay Thibodeau Used with Permission. All rights reserved. External Confirmation

5  Selecting items for confirmation  Designing the request  Communicating the request to the appropriate third party  Obtaining the response  Evaluating the information received, including its reliability External Confirmation The confirmation process includes: 5 © 2013 Dr. Denise Hanes, Dr. Barbara Porco, and Dr. Jay Thibodeau Used with Permission. All rights reserved.

6 Auditors should … Exercise professional skepticism Authenticate responding entity Validate authorized respondent Maintain control Directly communicate with the respondent The Confirmation Process 6 © 2013 Dr. Denise Hanes, Dr. Barbara Porco, and Dr. Jay Thibodeau Used with Permission. All rights reserved.

7 The process is secure and properly controlled There is direct communication The information is obtained from a third party who is the intended respondent Electronic Confirmations The ASB and IAASB state that electronic confirmations can be considered reliable audit evidence if the auditor is satisfied that… 7 © 2013 Dr. Denise Hanes, Dr. Barbara Porco, and Dr. Jay Thibodeau Used with Permission. All rights reserved.

8 Reliability Risks Process might not be secure or properly controlled Respondent is not authorized to respond Integrity of the transmission might have been compromised Electronic Confirmations: RISKS 8 © 2013 Dr. Denise Hanes, Dr. Barbara Porco, and Dr. Jay Thibodeau Used with Permission. All rights reserved.

9 If an intermediary is used to facilitate confirmations, the AUDITOR should obtain an understanding of the controls over the procedures used by the intermediary to process the confirmation requests and responses. Electronic Confirmation Controls 9 © 2013 Dr. Denise Hanes, Dr. Barbara Porco, and Dr. Jay Thibodeau Used with Permission. All rights reserved.

10 The written record that provides the support for the representations in the auditor's report should: Demonstrate compliance with the standards Support the basis for conclusions reached Demonstrate that the underlying accounting records agree or reconcile with the financial statements AS No. 3: Audit Documentation 10 © 2013 Dr. Denise Hanes, Dr. Barbara Porco, and Dr. Jay Thibodeau Used with Permission. All rights reserved.

11 DOCUMENT Unless you properly DOCUMENTAND RETAIN EVIDENCE of your work, others will not be able to rely on the testing performed rely on the testing performed. Remember 11 © 2013 Dr. Denise Hanes, Dr. Barbara Porco, and Dr. Jay Thibodeau Used with Permission. All rights reserved. AS No. 3: Audit Documentation

12 Provides audit evidence to address the risk of material misstatement due to fraud and because of the importance of cash to a company’s liquidity and ongoing operations. Why Confirm Cash? 12 © 2013 Dr. Denise Hanes, Dr. Barbara Porco, and Dr. Jay Thibodeau Used with Permission. All rights reserved.

13 You: Audit Staff Firm: Putnam and Jacobs LLP Client: Simply Soups Inc. Year End: December 31, 2013 Task: Complete the audit step “Confirm Cash Balances” Use:Positive blank confirmations Service: edu.Confirmation.com Case Study 13 © 2013 Dr. Denise Hanes, Dr. Barbara Porco, and Dr. Jay Thibodeau Used with Permission. All rights reserved.

14 https://edu.confirmation.com/home.aspx edu.Confirmation.com 14 © 2013 Professor Brian Fox. Edu.Confirmation.com Used with Permission. All rights reserved.

15 Download from: edu.Confirmation.com Includes: Simply Soups Inc. Case Study – Audit Procedure Checklist – Confirmation Testing Workpaper and Memo – Client Audit Materials Trial Balance Cash Lead Sheet Bank Reconciliation Summary Bank Account Listing Instructional Guide for Student – A true step-by-step handbook – edu.Confirmation.com Shortcuts – Trouble Shooting Checklist – Technical Guide Case Study Materials 15 © 2013 Dr. Denise Hanes, Dr. Barbara Porco, and Dr. Jay Thibodeau Used with Permission. All rights reserved.

16 Trial Balance 16 Simply Soups Inc.PBC 177 Washington Lane, Cherry Hill, NJ 08034 609-555-5555 Trial Balance As of December 31, 2013 DebitCredit Cash - Acct. 10000 10001 Fifth Federal478,921.54 A 10002 Sparkasse-Frankfurt235,087.29 10003 American NorthWest Bank144,019.83 10004 BNY Federal477,832.15 10005 Tenth National Bank301,015.18 10006 Bank of Citizens348,701.60 1,985,577.59 Accounts Receivable - Acct. 11000 Tick Legend AThe sum of this balance was agreed into the Balance Sheet without exception, W. Downey (Intern) PBCPrepared by client

17 Cash Lead Sheet 17 Cash Lead Sheet TB Agreed to 12/31/2013 Trial Balance without exception. Simply Soups Inc. PQ Agreed to 9/30/2013 Trial Balance without exception. As of December 31, 2013 PY Agreed to 12/31/2012 Trial Balance without exception. Account Balance 12/31/13TB Balance 9/30/13 PQ Change from 9/30/13 to 12/31/13 ($) Change from 9/30/13 to 12/31/13 (%) Balance 12/31/12 PY Change from 12/31/12 to 12/31/13 ($) Change 12/31/12 to 12/31/13 (%) 10001 Fifth Federal$478,922$492,531 ($13,610)-2.76%$489,120 -$10,198-2.09% 10002 Sparkasse- Frankfurt$235,087$229,791 $5,2962.30%$231,686 $3,4011.47% 10003 American NorthWest Bank$144,020$151,675 ($7,655)-5.05%$149,277 -$5,257-3.52% 10004 BNY Federal$477,832$462,403 $15,4293.34%$469,513 $8,3191.77% 10005 Tenth National Bank$301,015$311,653 ($10,638)-3.41%$316,987 -$15,972-5.04% 10006 Bank of Citizen$348,702$309,243 $39,45812.76%$311,785 $36,91711.84% Tick Legend

18 Bank Reconciliation Summary 18 Account Bank Balance 12/31/13 A Reconciling Items B Book Balance 12/31/13 TB 10001 Fifth Federal$508,219 $29,298 $478,922 10002 Sparkasse-Frankfurt$315,712 $80,624 $235,087 10003 American NorthWest Bank$121,987 ($22,033) $144,020 10004 BNY Federal$493,154 $15,322 $477,832 10005 Tenth National Bank$312,580 $11,565 $301,015 10006 Bank of Citizens$304,312 ($44,389) $348,702 Tick Legend A Agreed to 12/31/2013 Bank Statements without exception. B Reconciling items were tested without exception, see Bank Test Documentation (Audit Step 1000-3). TB Agreed to 12/31/2013 Trial Balance without exception.

19 Bank Account Listing 19 Bank NameBank AddressBank Manager Account Name Account Numbers Authorized Signer Fifth Federal 73 Union Street New York NY 10001 George WilliamsChecking675-42223Lou Jennings Sparkasse-Frankfurt Landstrasse 89-21 Frankfurt 60326 DE Helga JonesChecking44-322711Lou Jennings American NorthWest Bank 234 Market Street Milwaukee WI 53202 Richard JohnsonChecking05-198305Lou Jennings BNY Federal 3621 Avenue De Lafayette Boston MA 02111 Betty SmithSavings061-22031Lou Jennings Tenth National Bank 313 S. Chadwick Street Philadelphia PA 19103 Greg FordhamSavings26-798422Lou Jennings Bank of Citizens 3621 Union Ave Denver CO 80220 Denise BentleyChecking89-123661Lou Jennings

20 Overview of Steps TaskDateInitial Register at edu.Confirmation.com Watch 3-minute tutorial Review client documents and audit workpapers Assess controls in place around the edu.Confirmation.com service Set up client Enable sharing for team members* Add bank accounts Request Client Authorization Code approval (client’s electronic signature) Initiate confirmations Evaluate responses Initiate second requests or reconfirmations Evaluate responses and complete deliverables 20 © 2013 Dr. Denise Hanes, Dr. Barbara Porco, and Dr. Jay Thibodeau Used with Permission. All rights reserved. * This step is only necessary if teams are used.

21 Confirmation Testing Workpaper 21 Confirmation Testing Workpaper Simply Soups Inc. As of December 31, 2013 Account Reconciled Bank Balance as of 12/31/13 (per Client) A Confirmed Bank Balance as of 12/31/13 (per Bank) Differences Noted 10001 Fifth Federal $508,219.33 10002 Sparkasse-Frankfurt $315,711.76 10003 American NorthWest Bank $121,987.17 10004 BNY Federal $493,154.12 10005 Tenth National Bank $312,580.29 10006 Bank of Citizens $304,312.43 Tick Legend A Balances were traced from Bank Reconciliation Testing Summary (WP 100-2). STUDENT WORKPAPER DELIVERABLE

22 1.Agree confirmed detail to the bank account listing on the key information summary; 2.Agree confirmed balances to the reported bank balance on the bank reconciliation testing summary; 3.Is the confirmation persuasive audit evidence? NOTE: If the confirmation is not persuasive audit evidence, additional confirmation requests may be sent or alternate procedures may be performed. Evaluating Responses 22 © 2013 Dr. Denise Hanes, Dr. Barbara Porco, and Dr. Jay Thibodeau Used with Permission. All rights reserved.

23 1.Completed Audit Procedure Checklist 2.Completed Confirmation Testing Workpaper and Memo Workpaper: Evaluation of initial confirmations Evaluation of reconfirmations or second confirmations (where necessary) Any additional steps or risks Memo: Purpose for sending positive confirmations Reasons for using a third-party intermediary Risks involved in using a third-party intermediary Steps taken to gain comfort over such risks Assessment of whether the work performed provides the basis to reach a conclusion on the financial statement assertions tested 3.Confirmation Log 4.Received Confirmations Deliverables 23 © 2013 Dr. Denise Hanes, Dr. Barbara Porco, and Dr. Jay Thibodeau Used with Permission. All rights reserved.

24 Some of the audit procedures for obtaining audit evidence for CASH has already been performed by: – Audit Intern – Audit Associate Instructor serves as the Audit Manager Audit Team Students may work individually or in groups! 24 © 2013 Dr. Denise Hanes, Dr. Barbara Porco, and Dr. Jay Thibodeau Used with Permission. All rights reserved.

25 End of Session ONE QUESTIONS? 25 © 2013 Dr. Denise Hanes, Dr. Barbara Porco, and Dr. Jay Thibodeau Used with Permission. All rights reserved.


Download ppt "Electronic Confirmation Process edu.Confirmation.com Simply Soups Inc. Background and Case Introduction 1 © 2013 Dr. Denise Hanes, Dr. Barbara Porco, and."

Similar presentations


Ads by Google