When determining if confirmations are required to be used in a financial statement audit, the auditor must follow paragraphs 5, 7, 15 of the AU Section 330.
Paragraph 5 states that “the auditor uses the audit risk assessment in determining the audit procedures to be applied, including whether they should include confirmation”.
Paragraph 7 details that “the greater the combined assessed level of inherent and control risk, the greater the assurance that the auditor needs”. As such, the auditor needs confirmations when there is a high risk of audit error.
Paragraph 15 outlays steps of the confirmation process, which include “designing the confirmation request, performing the confirmation procedures, and evaluating the results of the confirmation procedures”.