MTF has implemented a function to print circularization letters in SAP
MTF has implemented a function to print
circularization letters in SAP
Circularization is an audit procedure governed by ISA Italy 505 "External confirmations" and commented on in the document "The application of international auditing standards (ISA Italy) to smaller companies". It consists of requesting confirmation of the balance shown in the accounts at a certain date, the nature and evidence of which vary depending on the inherent risk and control risk.
In addition to customers and suppliers, this procedure also covers banks and insurance companies, commodity depositories and leasing companies, agents, lawyers and tax advisors as well as consultants in general.
With the balance confirmation procedure, numerous audit objectives can be met, including:
- the existence requirement, as you obtain direct confirmation from a third party;
- the valuation requirement, in that any disputes, returns and claims not accounted for in the financial statements can be identified;
- the requirement for the legitimacy of rights and obligations;
- the requirement of the principle of competence.
However, it must be remembered that this confirmation can never provide all the necessary evidence regarding the assessment of the debtor's solvency.
The procedure can be initiated by means of a standard text, to be drafted on company letterhead:
All PBs that have balance at a preset date are extracted. The information is taken from the SAP database, so the data can be verified by printing the verification balance at the preset date.