Importance of the bank letter and the procedures used to obtain confirmation from the bank

 The bank letter is important because it is independent confirmation of a numbers of significant matters in the client’s financial statements.

Importance of the bank letter and the procedures used to obtain confirmation from the bank

It confirms cash and bank balances which may well be a significant asset.

It also provides confirmation of customers’ assets held as security, customers’ other assets held (as custodian) and contingent liabilities.

The following are the procedures used to obtain confirmation from the banks

  • Obtain written authority from the client to the bank to disclose the necessary Information.

  • Send a bank letter in standard form to the bank in sufficient time for it to arrive at least a month before the year-end. The letter should state both the year-end date and the previous year-end date, and should refer to the client’s granting of Authority.

  • If additional information over and above what is in the standard letter is requested, send a separated letter requesting that information.

  • When confirmation is received from the bank, check that the bank has answered all questions in the letter.

  • Follow up all disclosed in the bank letter

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