Why bank confirmation letter matters to a first-time founder
Auditors need independent evidence that cash, loans, guarantees and account restrictions are recorded correctly. A confirmation sent directly by the bank is stronger evidence than a statement supplied only by management. Missing or slow responses can delay an audit and, in turn, financing or statutory filings.
Examples of bank confirmation letter
During a Singapore company’s year-end audit, its auditor asks the bank to confirm a S$480,000 current-account balance, a S$1 million unused facility and a guarantee. The company authorises the request, but the bank sends its response directly to the auditor to preserve independence.
Common misunderstanding
This is not normally a letter saying the customer can afford a purchase, and it is not the same as a bank statement or proof-of-funds letter. Its usual purpose is to provide independent audit evidence about specified banking relationships as at a stated date.
When to use it
Expect one when your accounts are audited. Confirm every bank relationship, authorise requests promptly and allow time for fees and processing. Follow the auditor’s secure process rather than collecting the response yourself. If a trading partner wants payment assurance, a different instrument may be required.