Exam AUD topic 1 question 577 discussion

Actual exam question from AICPA's AUD

Question #: 577
Topic #: 1

The usefulness of the standard bank confirmation request may be limited because the bank employee who completes the form may:

A. Not believe that the bank is obligated to verify confidential information to a third party.
B. Sign and return the form without inspecting the accuracy of the client's bank reconciliation.
C. Not have access to the client's cutoff bank statement.
D. Be unaware of all the financial relationships that the bank has with the client.

Show Suggested Answer

Suggested Answer: D 🗳️
Choice "D" is correct. A bank employee may not have access to all information about transactions with the audit client and thus may be unaware of all the financial relationships the bank has with the client.
Choice "A" is incorrect. Standard bank confirmations contain a signature from an authorized client employee and are a very commonly used audit procedure. It is unlikely that a bank would refuse the request since it has been authorized by the client.
Choice "B" is incorrect. The confirmation is used to verify the bank balance as of year-end. Bank employees generally would not have access to the client's bank reconciliation.
Choice "C" is incorrect. Even though it is likely that the bank would have access to a cutoff bank statement, the detail on this statement is unnecessary to confirm the final balance.

by gemazyni at April 5, 2025, 4:50 p.m.

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