Share this content
0
1310

Unable to confirm year end bank balances in audit

Unreasonable bank charge for confirming EOY balance confirmation of audit client

Didn't find your answer?

Search AccountingWEB

Hello colleagues,

As part of our audit testing procedures, we request banks to confirm directly to us the balances and other financial information on clients we audit. A case in point is Bank of Cyprus PLC, Nicosia, Cyprus asking EUR 100 per year to confirm the balances for a client. The client has stopped working with them and refuses to cover the fee which adds up a few years on the grounds of it being unreasonable.

In our view the bank fee indeed seems unreasonable or at least questionable, for other banks, the client operates with charge only EUR 50 /year. Our take, if we can not confirm the balances as ISA 505 guidance, is to issue a modified audit opinion with "limitation of scope".

Any thoughts very much appreciated.

Replies

Please login or register to join the discussion.

avatar
24th Apr 2019 13:33

ICAEW have a factsheet on just this "Do I still need a bank letter?"

Effectively, in the UK, you don't HAVE to have a bank letter, you are supposed to exercise professional judgement as to whether the assessed risks require you to get a bank letter....

If anything was subsequently found wrong with the bank balance, or the guarantees etc then I would personally feel a little exposed without a bank letter, but your view may differ.

Thanks (0)
avatar
24th Apr 2019 13:42

I no longer audit, however when I did, I found bank letters to be frequently wrong in terms of omitted accounts, securities & guarantees. This then usually involved writing back and forward to tell them what they missed which to my mind, entirely defeated the purpose.

Depending on the materiality and your own assessment of risk, you don't necessarily have to get a letter which would not extend to a limitation of scope.

Thanks (0)
avatar
By Mr_awol
to Roland195
25th Apr 2019 14:37

You aren't wrong.

I still like to have one - but don't place a whole lot of faith in them really. Ive have them back wrong, and when ive flagged this with the bank ive been asked for a list of missing information so that they can re-issue correctly(!). Maybe one day i'll ask for one for my firm, and when it just shows our actual balances i'll ask them to resend it showing the £45million contained in a savings account as they've omitted it from the audit letter. Then I can pop down the local branch as ask to withdraw my savings?

Thanks (1)
avatar
24th Apr 2019 14:17

Pretty sure i’ve read in guidance, and possibly also received technical advice from ACCA during a monitoring visit that an alternative to a bank audit letter can be you physically looking over the shoulder of the client as they login to their online banking. You would presumably have to exercise judgement as to any accounts that may not have online access, and any borrowing facilities etc
To be honest if the client requires an audit on the basis of turnover or balance sheet then i’d be telling them to quit moaning about 100 Euro and get on with it. But I guess it’s their choice and I think the limitation of scope you mention sounds reasonable to me. I suspect you’ve incurred more than 100 euro in wasted time costs dealing with this already.

Thanks (0)
avatar
25th Apr 2019 08:57

Patisserie Valerie anyone?

Thanks (1)
to paulwakefield1
25th Apr 2019 12:49

paulwakefield1 wrote:

Patisserie Valerie anyone?

What about Patisserie Valerie?

In that case the company didn't even make the auditor aware they had accounts with that bank so having a bank letter would make no difference.

I agree that if you are comfortable the balance is correct and there are no guarantees or other items missing then you dont need a bank letter.

Thanks (0)
avatar
to mike_uk_1983
25th Apr 2019 14:37

Ah well, you are more up to speed with PV than me. I had understod at least some of the problem was with their existing banks.

Nonetheless my point stands. I well remember a, rapidly ex, client where the bank letter revealed a bank account that was not in the books. In the immortal words of the client when asked "Ah, you're not meant to know about that account". Clearly not one of the more sophisticated fraudsters. :-)

Thanks (2)
avatar
01st May 2019 09:52

Many years ago when I was in auditing, we requested bank letters for every job. I always thought they were a complete waste of time. Often when we knew the client had more than one account with a bank branch, the letter would come back with only one account listed. It was clear that they were never done properly. If the client has an undisclosed account, it will almost certainly be obvious for a hundred reasons.

Thanks (0)
01st May 2019 16:25

oooh an accounting question not a tax one how novel.

No. You pay the fee and put it on your bill- or swallow it. That's a bit lame really modifying an audit report and besides if you do that you would need bank letter next year or you couldn't do it could you.

If the clients do not pay the fee and you wont pay, resign and do someone elses accounts.

In my opinion you want a bank letter.

If I was your RI I would chuck the file back at you till you had one.

Because its not just the balance on that account it discloses its the 300 other accounts on the letter they didn't tell you about.....nd the guarantees..... etc etc

Thanks (2)
Share this content