The External Confirmation Process

New Guidance under the Clarified Audit Standards

Donald K. McConnell, PhD, CPA, CFE, and Charles H. (Chip) Schweiger, CPA, and Stephanie C. McConnell, CPA

The Auditing Standards Board (ASB) issued its long-anticipated Clarity Project standards, effective for audits of financial periods ending on or after December 15, 2012, in order to achieve two goals. First, the ASB wanted to continue the convergence of U.S. auditing standards with international auditing standards. Second, it sought to make auditing standards more readable and to provide enhanced application and explanatory guidance. Although the ASB considers the clarified standards' changes to be fundamentally nonsubstantive (other than the changes for audit reports), it has provided a considerable amount of useful new implementation guidance in several areas, including the use of external confirmations. Because confirmation procedures could represent a substantial portion of an audit engagement, auditors should be familiar with the changes enacted by AU-C section 505, “External Confirmations.”