Bank Confirmation or Cutoff Statement: What Does Each One Prove?
A bank confirmation verifies information with the bank. A cutoff bank statement helps test the client's year-end bank reconciliation.
Bank confirmation
The auditor obtains direct evidence from the financial institution about account balances, loans, and other specified banking relationships.
Cutoff bank statement
A short-period statement after year-end helps verify that outstanding checks and deposits in transit actually cleared shortly after year-end.
Different assertions
The confirmation supports existence and completeness of bank relationships, while the cutoff statement is especially useful for reconciliation and cutoff testing.
Combined evidence
Cash audits commonly use both because neither procedure answers every cash assertion alone.
The takeaway
Use confirmations for external bank information and cutoff statements for clearing of year-end reconciling items.
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FAQ
Does a bank confirmation replace the bank reconciliation?
No.
Can a cutoff statement test outstanding checks?
Yes.
Can a bank confirmation reveal loans?
Yes when requested.