ICAI clarifies Using Information Available at Information Utility (IU) Platform for External Confirmations [Read Announcement]

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The Institute of Chartered Accountants of India ( ICAI ) has clarified certain things on using Information available at Information Utility (IU) Platform for External Confirmations by Auditors.

Standards on Auditing (SAs) recognize the importance of ‘External Confirmations’ as audit evidence.

A recent announcement of the ICAI said that on the matter of External Confirmations, the ICAI has recently received communication from the National Financial Reporting Authority (NFRA) regarding functions of National e-Governance Services Limited (NeSL) which might be useful for the auditors in obtaining audit evidence through external confirmations.

The highlights of the same areas under:

“NeSL incorporated as a Union Government Company has set up the ‘Information Utility (IU)’ and is regulated by the Insolvency and Bankruptcy Board of India. The IU is designed as an institutional intervention that stores evidence of financial contracts to assist in stressed assets resolution. The IU is open to financial and operational creditors since January 2018. Till date, approx. two-thirds of the loans to companies given by banks have been filed in the IU as creditors have an incentive to buy protection and enhance enforceability of contracts under the IBC. The IU is designed to receive financial information from any party to the debt. The debtors are expected to verify and authenticate the liability as sent by their respective creditors to IU. However, in the absence of any such statutory requirement, the debtors are not filing this information or reconciling the same with IU. The auditors can have full access to the information stored in IU in respect of client company as reported by their creditors.”

The Auditing and Assurance Standards Board of ICAI at its 193rd meeting held on 25th January 2019 (meeting adjourned and continued on 5th February 2019) considered the aforesaid communication received from NFRA. After a detailed discussion on the matter, the Board was of the view that the information available at the IU platform would be highly useful in the audit process and will strengthen the audit opinion.

Accordingly, the ICAI issued the following guidance for the benefit of the members.

“Whenever external confirmations are required as per the requirements of SA 505 – External Confirmations, auditors should seek external confirmations directly from the third parties (the confirming parties). Further, auditors are advised to use the information available at the Information Utility platform of National e-Governance Services Limited, as detailed in paragraph 3 above, as an additional source of external confirmations to strengthen the audit evidence,” the ICAI said.

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