French Commercial code
In forceThe professional practice standard relating to requests for confirmation from third parties, approved by the Minister of Justice, is shown below:
PROFESSIONAL PRACTICE STANDARD RELATING TO REQUESTS FOR CONFIRMATION FROM THIRD PARTIES
Introduction
1. In order to gather the elements that enable him to reach conclusions on which to base his opinion on the financial statements, the auditor chooses from among various audit techniques, including that of requesting confirmation from third parties.
2. The purpose of this standard is to define the principles relating to the use of this technique by the statutory auditor.
Characteristics of the third-party confirmation request
3. The third party confirmation request consists of obtaining a statement from a third party addressed directly to the statutory auditor concerning one or more items of information.
4. A distinction should be made between a closed confirmation request whereby the third party is asked to agree to the information provided and an open confirmation request whereby the third party is asked to provide the information itself.
5. This control technique is generally used to confirm an account balance and the items comprising it, but it can also be used to confirm:
- the terms of a contract or the absence of specific agreements likely to have an impact on revenue recognition;
- or the absence of off-balance sheet commitments.
6. The statutory auditor uses this control technique when he considers it necessary to gather sufficient and appropriate evidence to verify an assertion.
In doing so, he takes into account the risk of material misstatement at the level of the assertion and what is expected from other planned audit procedures in terms of reducing that risk.
7. The usefulness of this audit technique is not the same depending on the assertion to be audited. For example, while it can be used to gather reliable and relevant information on the existence of trade receivables, it does not generally make it possible to gather information on the valuation of these receivables, due to the difficulty of questioning a third party about its ability to pay them.
Implementation of the request for confirmation from third parties
8. The statutory auditor determines the content of third party confirmation requests based in particular on the assertions concerned and factors likely to affect the reliability of responses such as the nature of the confirmation request, closed or open, or his experience from previous audits.
9. The statutory auditor has control over the selection of third parties to whom it wishes to send confirmation requests, the drafting and sending of such requests, and the receipt of responses.
10. If the entity's management objects to the third party confirmation requests envisaged by the statutory auditor, he shall consider whether there are valid grounds for the refusal and shall collect sufficient and appropriate evidence on those grounds.
11. If he considers that management's refusal is based on valid grounds, the statutory auditor carries out alternative audit procedures in order to obtain sufficient and appropriate evidence on the point(s) concerned by the requests.
12. If the statutory auditor considers that management's refusal is unfounded, the statutory auditor draws any consequences in his report.
Evaluation of the results of the third party confirmation request
13. Where the statutory auditor does not obtain a response to a request for confirmation, the statutory auditor shall carry out alternative audit procedures enabling the collection of such evidence as the statutory auditor considers necessary to verify the assertions being audited.
14. Where the third parties' request for confirmation and the alternative procedures performed by the statutory auditor do not enable him to collect sufficient and appropriate evidence to verify a given assertion, he performs additional audit procedures in order to obtain it.
15. The statutory auditor assesses whether the results of the third party confirmation requests and the alternative and additional audit procedures performed provide sufficient appropriate evidence to verify the assertions being audited.
