Loans, Bank and Cash: Bank Confirmation Letter

ACCA F8 考試：Loans, Bank and Cash: Bank Confirmation Letter

Obtaining a bank confirmation letter is standard practice on all audits, unless the auditor determines that the banking transactions and relationships are very simple and sufficient appropriate audit evidence is available from other sources.

1. Format 

Many national banking associations and auditing bodies have reached agreement on the form and process for auditors to send, and for banks to complete, bank confirmation letters.

The British Bankers' Association (BBA) is one such body from which the following illustrations have been taken.

Instead of the bank confirmation letter containing an exhaustive list of all the possible information which could possibly be required ("blank sheet" approach), a standard approach and form of letters have been agreed with the BBA. 

Banks will require specific written authority from clients to be able to release information to auditors. Rather than new authorities being issued each year, an on-going standing authority will be sufficient.*

1.1 Content 

Issued on auditor's letterhead.

Should be sent at least two weeks before client's year end.

Bank's name and address.

Auditor's name and address.

Company's name, main account sort codes and main account(s) numbers.

Period year end.

Details of confirmation that authority already was issued by the client.

Request for acknowledgement.

Additional information required:

Trade finance (one of the facility account numbers given).

Derivative and commodity trading (facility account number).

1.2 Reply Content

Disclaimer by bank— "Our response is given solely for the purposes of the audit and creates no responsibility to the auditors."

Balances on all accounts (including loans, joint a/cs and trade name a/cs).

Details of all accounts closed in the last 12 months.

Facilities—loans/overdrafts/guarantees etc (including term, repayment, review date, limit, etc).

Securities (including set-off arrangements).

Additional banking relationships—not covered by above.

Custodian arrangements—the nature and quantity of any assets held but not charged (e.g. title deeds held for safekeeping rather than securing a mortgage).

Trade finance—letters of credit, acceptances, bills discounted, bonds, guarantees, indemnities and other contingent liabilities.

Derivatives—foreign exchange contracts, forward rate agreements, financial futures, interest rate swaps, options, bullion contracts etc.

2. Planning Considerations

Determine the date by which the confirmation is required.

Determine the level of confirmation required (e.g. to include a request for information on trade finance and derivatives).

Make arrangements to gather the required information concerning main account numbers and sort codes.

Agree that the bank authority is still in place and up to date.

Determine where to send the request—usually a central banking location and not the client's local branch.