MTF has just released a new feature for the printing of circularization letters
The circularisation is an audit procedure regulated by ISA Italia 505 "External Confirmations" and commented on in the document "The application of international auditing standards (ISA Italia) to smaller companies", which consists of requesting confirmation of the balance resulting from the accounts at a certain date, the nature and probative elements of which vary according to the intrinsic and control risks.
The parties to be subjected to this procedure are, in addition to customers and suppliers, banks and insurance companies, goods depositaries and leasing companies, agents, lawyers and tax experts as well as consultants in general.
Numerous audit objectives can be met with the confirmation of balances, among others:
- the requirement of existence, as direct confirmation is obtained from a third party;
- the requirement of assessment, since any disputes, returns and complaints not considered in the financial statements can be identified;
- the requirement of legality of rights and obligations;
- the requirement of the accrual principle.
It should be borne in mind, however, that this confirmation can never provide all the necessary evidence of the debtor's solvency.
The procedure can be initiated by means of a standard text, to be written on company letterhead:
All BPs that have a balance on a preset date are extracted. The information is taken from the SAP database, so that the data can be verified by printing out the audit balance on the preset date.