Do auditing standards require the use of confirmations in the audits of cash balances and accounts receivable balances?

Question

What will be an ideal response?

Answer 1

For decades, auditors have been required to use external confirmations for accounts receivable unless
accounts receivable are immaterial to the financial statements, the use of confirmations would be
ineffective, or the auditor’s combined assessed level of inherent risk and control risk is low and the
evidence provided by other substantive procedures would reduce audit risk to an acceptably low level.
Those provisions are included in the PCAOB’s AS 2310, “The Confirmation Process,” and they have
been carried forward in the recently finalized ASB Clarity Standard codified in AU-C Section 505,
“External Confirmations.” Interestingly, international auditing standards suggest, but do not require,
their use for accounts receivable.
In contrast to accounts receivable, auditing standards do not require the confirmation of cash
balances. However, confirming cash balances is generally done in most audits.