Determine whether to implement the letter of credit.
Auditors should fully consider the importance level of audit matters, the evaluation level of inherent risk and control risk, and whether the audit evidence obtained through the implementation of alternative audit procedures can reduce the audit risk to an acceptable level, and so on, and decide whether to implement credit certification.
When auditing the authenticity and legality of financial revenues and expenditures, auditors should generally prove the objects to which the above-mentioned letters and certificates apply, but in the following circumstances, auditors may decide not to prove them: First, there is sufficient evidence to prove that the matters to be proved are not important to the authenticity of accounting statements and the legitimacy of economic activities; Second, there is enough evidence to prove that the letter is likely to be invalid; Third, auditors can replace letters with lower audit cost and higher audit efficiency to obtain sufficient audit evidence.
Determine the content, scope, time and method of the letter.
1. The contents of the letter certificate are mainly determined from the audit items to which the letter certificate applies, and whether to implement the letter certificate is decided according to the audit items. The confirmation letter should contain the necessary information.
2. The corresponding range can be determined by the professional judgment of auditors, and the corresponding samples can be determined by judgment sampling, and the corresponding samples can also be selected by statistical sampling. However, the confirmation samples determined by any method should include items with large amount, items with long aging, items with frequent transactions but small ending balance, major related transactions, major or abnormal transactions and transactions that may be controversial or lead to major errors or frauds.
3. The confirmation deadline is generally the accounting statement date, and the confirmation will be implemented after the accounting statement date. If the inherent risk and control risk of audit risk assessment are low, auditors can choose a date before the accounting statement date as the deadline for confirmation, but they should make substantial tests on the changes of confirmation items from the deadline to the accounting statement date.
4. The way of confirmation is to determine whether to adopt positive confirmation or negative confirmation. When the following situations exist at the same time, in order to improve audit efficiency, auditors can adopt negative letters: the evaluation of inherent risk and control risk is low; The letter of credit involves a large amount of small account balance; There are not many expected errors; There is no reason to suspect that the interviewees are not serious about communicating with each other.
Letter explanation
Confirmation letter refers to the process that auditors obtain and evaluate audit evidence through the statement of relevant information and existing conditions directly from the third party in order to obtain information that affects the items identified in financial statements or related disclosures. For example, check whether the balance of the company deposit journal is consistent with the actual deposit amount of the bank by letter.