Auditing is an independent examination of the financial statements of an entity, irrespective of its size or legal form, for the auditor to express an opinion thereon. An auditor would acquire sufficient and appropriate audit evidence in order to draw a reasonable opinion on the financial statements. An Audit Balance confirmation is audit evidence received by the auditor by a written or an electronic response from the entity or a third party verifying the accuracy of the information in the books of accounts.

  • internal confirmation and
  • external confirmation

Examples of Internal balance confirmations are inventory, movement in capital confirmations, etc, which are acquired from within the entity. However, in case of external confirmations such as receivables/payable confirmations, bank balance confirmation, etc are to be acquired by the 3rd parties related to the entity’s books of accounts.

External confirmation can  also be categorized into

  • Positive confirmation – A positive confirmation is such where the recipient is expected to reply to the request of confirmation, irrespective of whether they agree with the information or not. In case of failure to reply to the auditor, the auditor should perform follow up procedures.
  • Negative confirmation – In case of a negative confirmation, the recipient is expected to reply to the request of confirmation only if they disagree with the information that requires confirmation. In case of no reply within the specified period, the auditor can conclude that the party has confirmed this information.


However, a negative confirmation should be used during an audit only if the auditor has assessed the risk of a material misstatement as low. Generally, when negative confirmations are used, the auditor puts considerable examination into the effectiveness of the internal control, substantive tests of the entity’s transactions and analytical procedures as evidence of the fairness of the books of accounts.