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534 WordsJul 22, 20143 Pages
Research Paper Topic: Should Auditors Work More with Electronic Confirmations than Paper Confirmations? My Opinion: Yes. Auditors should work more with Electronic Confirmations than Paper Confirmations. Paper Confirmation’s Limitations: 1. Client provides false contact information (address, fax, phone numbers etc.) 2. Client provides the contact name (correct contact information but a dishonest associate within the confirming entity) 3. Client influences the confirmation process (dishonest client creates third-party credentials that closely resemble legitimate credentials, like fake website) 4. Signature verification is impractical (auditors lack available resources to validate the legitimate signatures on responses to confirmation request) 5. Audit efficiency limitations (time-consuming and expensive) Relevant Case: 1. Shepherd Major Plan Option Fund (2013) James Shepherd used software tools to create fake bank statements, directed the auditors to send bank confirmation letters to a PO Box he had rented, forged a fictitious bank employee’s signature, and sent the fraudulent confirmations back to the auditor 2. China Biotics Inc. (2011) When viewing the company's online bank accounts, BDO auditors were directed by CHBT staff to a suspected fake bank website. Another irregularity BDO cited was that the chop or authenticity seal of the purchaser on a sales contract belonged to another company than the one named on the sales contract. Then BDO Limited resigned as CHBI’s independent auditor. Related Standards: 1. Original SAS No. 67 (1991) Fail to require the auditor to validate the client-provided mailing addresses or to verify the confirmation respondents’ competence and objectivity. 2. AICPA Practice Alert 2003-1 (2003) Fail to consider the concept of secure information electronic transfer and the use of a secure

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