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Give your comments and observations on the follow…

Give your comments and observations on the following: (a) Balance confirmations from trade receivab…

Give your comments and observations on the following: (a) Balance confirmations from trade receivables/trade payables can only be obtained for balances standing in their accounts at the year-end.

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Kanishka Feb. 14, 2018

Direct conformation for balances from trade receivables is reliable evidence when a internal control system is weak. Direct confirmation of balances from trade receivables/trade payables in respect of balances standing in their accounts at the year-end is, perhaps, the best method of ascertaining whether the balances are genuine, accurately stated and undisputed particularly where the internal control system is weak.

Guidance note of institute states that the trade receivables may be requested to confirm the balance either: As at the date of the balance sheet; or As at any other selected date which is reasonably close to the date of the balance sheet. The date should be settled by the auditor in consultation with the entity.

Therefore, it is not necessary that balances of trade receivables/ trade payables should necessarily be verified only at the end of the year only. In fact, in order to incorporate an element of surprise, the auditor may consider different confirmation dates periodically. Therefore, the statement that balance confirmation from trade receivables/trade payables can only be obtained for balances standing in their accounts at the year-end is not correct as conformation can be taken when an auditor consider the requirement.