INTRODUCTION

Bank confirmation is a process of confirming bank balances, loan & borrowing’s balance, bank facilities, security and collaterals etc. of clients. The bank confirmation letter is a letter issued by bank or financial institutions validating bank balances, loan or borrowing, bank facilities, security or collateral provided to bank or financial institutions. The banks & financial institutions confirm the bank balances, loan & borrowing’s balance, bank facilities, security & collaterals etc. of clients upon the receipt of confirmation letter from respective clients. The bank confirmation request letter should be sent to the concerned bank or financial institutions authorizing by competent signatory of client. At present scenario, many bank provides an option to obtain the bank confirmation letter through online banking, confirmation.com and other online portals.

IMPORTANACE OF BANK CONFIRMATION LETTER IN FINANCIAL AUDIT

It is an important audit procedure that auditors generally used while doing the financial audit. The auditors should be responsible to ensure the financial statement of clients are presenting true & correct balances and transactions of bank account, bank borrowing, significant term and conditions along with security & collateral provided by clients to bank or financial institutions before giving an opinion on their report. In absence of bank confirmation, usually there might be a huge margin of possibility for presenting incorrect balances & transactions, insufficient fact and information related loan, borrowings & bank facilities and omission of material fact and figures in financial statement. Consequently, it results dilemma to the users of financial statement rather than enabling them to make a good financial decision. Often many users of financial statement draw an incorrect or incomplete pictures of financial statements due to the lack of adequate and sufficient presentation of bank balances, bank borrowing, bank facilities, security & collateral and major term and condition agreed with banks or financial institutions. Thus, auditors should always obtain the bank confirmations from banks or financial institutions to ensure adequate and sufficient presentation of bank balance, bank loan, borrowing and facilities, security & term & conditions before giving an opinion on financial statement.

KEY POINTS TO REMEMBER WHILE DRAFTING BANK CONFIRMATION REQUEST LETTER

Following points should be remember while drafting the bank confirmation request letter by clients before issuing it to bank or financial institutions:

• 1.
• The confirmation request letter should be in letterhead of auditor.

• 2.
• Details of client should be reflected in bank confirmation request letter (i. e. Bank Name, Branch Address, Customer ID, Relationship Manager’s details etc.).

• 3.
• The date of which balance confirmation is required to be reflected clearly to avoid confusions.

• 4.
• Details of recipient should be reflected in bank confirmation request letter to obtain the confirmation from bank or financial or financial institution without delay.

• 5.
• The subject matters of which confirmations is required should be reflected clearly.

• 6.
• The confirmation letter should be authorized by competent signatory of Clients.

Please note that this memo is for information purposes only and should not be construed as an advice. It does not necessarily cover every aspect of the
topics with which it deals. You should not act upon the contents of this alert without receiving formal advice on your particular circumstances.

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