Question

As one of the year-end audit procedures, the auditor instructed the client's personnel to prepare a confirmation request for a bank account that had been closed during the year. After the client's treasurer has signed the request, it was mailed by the assistant treasurer. What is the major flaw in this audit procedure?

Answer 1

The major flaw in this audit procedure is that the confirmation request was sent for a closed bank account, undermining the validity of the confirmation process. The auditor should have verified if the account was still active before requesting the confirmation.

Step-by-step explanation:

The major flaw in this audit procedure is that the confirmation request was sent for a bank account that had already been closed. As a result, the response received from the bank will indicate that the account does not exist, which is expected since the account has been closed. This flaw undermines the validity of the confirmation process because the auditor will not be able to obtain reliable evidence regarding the existence and accuracy of the account balance.

To address this flaw, the auditor should have verified with the client's personnel whether the bank account was still active before instructing them to prepare a confirmation request. This would have prevented the unnecessary effort of preparing and sending a confirmation request for a closed account.

Keywords: audit procedure, confirmation request, bank account, closed, flaw