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| Bangladesh Standard on Audit(BSA-505) |
Bangladesh Standard on Auditing (BSA) 505, titled "External Confirmations", provides guidelines on how auditors should use external confirmations as part of their audit procedures. The standard emphasizes the importance of obtaining direct verification from third parties to confirm the accuracy of financial information provided by the client.
Here are the key points of BSA 505:
1.Objective:
The objective of BSA 505 is to outline how auditors should request and use external confirmations to corroborate information such as account balances, transactions, or other relevant data from external parties (e.g., banks, customers, suppliers, etc.).
2.Types of External Confirmations:
Positive Confirmation:
A request asking the third party to respond whether they agree or disagree with the information provided.
Negative Confirmation:
A request asking the third party to respond only if they disagree with the information provided.
3. Reliability of External Confirmations:
The auditor must assess the reliability of external confirmations, considering factors such as the source's credibility, the nature of the information requested, and the response rate.
4. When to Use:
External confirmations are generally used when audit evidence from other sources is insufficient or unreliable, particularly in relation to balances and transactions that are material to the financial statements.
5. Considerations for Non-responses:
If external confirmations are not received, auditors must apply alternative procedures to gather sufficient audit evidence.
6. Procedures and Documentation:
The auditor must ensure that the external confirmation requests are appropriately designed, sent, and followed up. They must document the entire process, including any issues related to non-responses or discrepancies.
In summary, BSA 505 guides auditors in obtaining external confirmation evidence to support audit conclusions, ensuring that the audit is based on reliable, independently verified data.