I am the auditor at a small community bank and will be sending audit confirmations to a selection of our customer base. This will be a negative confirmation. In the past we have had an external CPA firm do this for us and they include a postage paid return envelope to direct any discrepancies directly to the audit firm. We will be doing this in-house this year and management is wondering if it's necessary to include a postage paid envelope or if we can direct them to call me (my direct phone number) in the case of discrepancies. Does anyone have any advice on sending or not sending the postage paid envelope with each negative confirmation notice?? Thanks!

I assume you are performing this function for your external auditors in connection with either an audit or directors examination. If so, first check with your external audit firm for their preference. Second, I have never heard of a phone call response with respect to a confirmation. Third, if you do mail I would recommend including an envelope.

About 10 years ago when I worked for a different financial institution we mailed ours out also; however the return envelope went to the external auditors - not in house. Any discrepancy went to them and they would contact us to research.

Mailing the envelope gets a better response.

A contact only in the event of a discrepancy would be a "negative confirmation"; not sure how that will hold up as part of an audit of your books and records. I too recommend checking with your external auditors on what they will accept. It would be a shame to waste a lot of work.

Thank you everyone for your feedback. I am performing the confirmation process in-house as part of our directors examination that also is being performed by me in-house. We are not using an external firm this year so any discrepancies or questions by our customers must be directed to me (the independent internal auditor). I think sending a postage paid envelope with the notice is the best way to handle this. I appreciate your feedback. Sometimes I think management tries to go to far in cutting costs.

You might want to check State law or other regulations, as I know that in some cases a Director's Examination cannot be perform "in-house" and has to be performed by a external CPA firm.

Thanks rclarey. Checking with state law, state examiners and FDIC examiners was done. We are able to do this in-house due to our size and the state laws and the fact that my audit independence has been established and reviewed.

I just wanted to make sure that management's penny pinching ways did not lead to further trouble

Save the postage-paid return envelopes for your positive confirmations.

Another enhancement to the "independence" of the process I have used when the Directors Exam is conducted in-house is to rent a separate P.O. Box for the return of any confirmation responces.