When should negative confirmations be used

By David Perry April 17, 2026

Negative confirmation is typically used when the accounting controls of a company have historically had very few errors and are thus considered to be strong. The company is asked to double-check the numbers and only confirm if there is a discrepancy.

Under what circumstances an auditor may decide to use negative confirmation requests?

Negative confirmation requests may be used to reduce audit risk to an acceptable level when (a) the combined assessed level of inherent and control risk is low, (b) a large number of small balances is involved, and (c) the auditor has no reason to believe that the recipients of the requests are unlikely to give them …

What is the difference between negative and positive confirmations?

Positive vs. While positive confirmation requires supporting information despite the accuracy of the original records, negative confirmation requires a response only if there is a discrepancy.

What is negative confirmation in audit?

A negative confirmation is a document issued by an auditor to the customers of a client company. The letter asks the customers to respond to the auditor only if they find a discrepancy between their records and the information about the client company’s financial records that are supplied by the auditor.

In which of the following circumstances would the use of the negative form of accounts receivable?

In which of the following circumstances would the use of the negative form of accounts receivable confirmation most likely be justified? A small number of accounts may be in dispute, and the accounts receivable balance arises from sales to many customers with small balances. More nonresponses are likely to occur.

When would it be appropriate for an auditor to consider using negative confirmations for receivables instead of positive confirmations?

The three types of confirmation forms are positive confirmation, blank confirmation forms, and negative confirmation. Negative confirmation is best applied when the risk of material misstatement is low, meaning that inherent risk and control risk are relatively low.

What are negative confirmations?

What Is a Negative Confirmation? Negative confirmation is a letter or document requesting that the recipient should only respond to the sender if there were an issue with the contents of the message or the recipient wanted to opt-out of the event that the letter had addressed.

What is a negative reply?

a response, or lack of response which results in the avoidance from a stimulus. NEGATIVE RESPONSE: “A negative response is otherwise known as a lacking response.”

Under what circumstances would positive confirmations be more appropriate than negative confirmations?

A negative confirmation requests that the customer respond only when it disagrees with the amount due to the client. Positive confirmations are generally used when an account contains large individual balances or if errors are anticipated because control risk was judged to be high.

What is a negative response letter?

A negative response letter generally informs the recipient of the letter of an impending action, and requires the recipient to respond or act within a specified time frame if the recipient objects to the action.

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Why do auditors send confirmations?

Confirmation letters are important because they provide an independent verification of your organization’s finances. … Your auditor might also send letters to other parties asking them to verify cash, inventory, notes payable, legal matters, contracts, or any unusual transactions.

Why is balance confirmation important?

For instance, the evidences related to receivable accounts balances can provide us with convincing evidence about existence claims. Moreover, the confirmation provides us with strong evidences regarding ownership claims on the properties kept by third parties.

Why are confirmations of accounts payable done?

Account payable confirmation is the confirmation prepared and processed by auditors to cross-check the amount and information between the client’s records and the client’s supplier’s records. Those could be included in the outstanding balances and transactions.

What are the types of audit confirmations available to auditors?

17 There are two types of confirmation requests: the positive form and the negative form. Some positive forms request the respondent to indicate whether he or she agrees with the information stated on the request.

Which is generally the most reliable form of evidence?

Answer: A. Confirmation of accounts receivable balance. Confirmation of accounts receivable balance is considered to be the most reliable because it…

Which of the following statements best expresses the auditor's responsibility with respect to events occurring in the subsequent events period?

The statement that best expresses the auditor’s responsibility with respect to events occurring between the balance sheet date and the end of his audit is that: The auditor is responsible for determining that a proper cutoff has been made and performing a general review of events occurring in the subsequent period.

How do you verify trade receivables?

Trace receivable report to general ledger. …
Calculate the receivable report total. …
Investigate reconciling items. …
Test invoices listed in receivable report. …
Match invoices to shipping log. …
Confirm accounts receivable. …
Review cash receipts.

What is the purpose of operational audit?

The aim of an operational audit is ultimately to optimize efficiency. By auditing the business’s internal policies and procedures, the company can identify trouble spots and operate more effectively.

When Should auditors use accounts payable confirmations?

In the audit of accounts payable, when there is a high risk of fraud, the accounts payable confirmation is usually performed by sending the accounts payable confirmation letters to suppliers asking them to fill out information such as all outstanding invoices, payment terms, payment histories, etc.

Which of the following is not considered appropriate when auditors use external confirmations?

Which of the following is NOT considered appropriate when auditors use external confirmations? The auditor should maintain control over sending the requests to the client’s customers. They should not allow management to mail the confirmation requests because of the risk that the requests could be tampered with.

Which of the following is the best argument against the use of negative accounts receivable?

Which of the following is the best argument against the use of negative accounts receivable confirmation requests? – Recipients are likely to feel that in reality the confirmation is a subtle request for payment.

How do auditors confirm their client's bank balance?

Normally, auditors review the bank’s balance and select some important accounts to be confirmed during the interim audit. Auditors draft the confirmation and send it to the client to review and get the confirmation signed. Once the confirmation signed, auditors are the one who proceeds the confirmation to banks.

What are the advantages of using a third party to send confirmations electronically?

The authors discuss the advantage of using a third-party for confirmations to increase reliability by stating, “The reliability of third-party evidence (e.g., bank statements) is enhanced when it is obtained from a knowledgeable, but unbiased, respondent who is outside the company under audit.

Why do confirmations not typically provide reliable evidence about the completeness assertion?

The confirmation of customers’ accounts receivable rarely provides reliable evidence about the completeness assertion because: customers may not be inclined to report understatement errors in their accounts.

How do you respond to a negative email example?

“Thank you for your review. I’m sorry to hear you had a frustrating experience, but I really appreciate you bringing this issue to my attention.” “Thank you for bringing this to our attention. We’re sorry you had a bad experience.

What are the negative words?

No.
Not.
None.
No one.
Nobody.
Nothing.
Neither.
Nowhere.

How do you converse with positive or negative responses?

Empathize. When someone starts off negatively, recognize their pain and then move them toward another topic. …
Compliment. …
Commiserate. …
Repeat back. …
Offer to help. …
Change the subject. …
Refuse to engage.

Can a negative response letter be used in a bulk transfer situation?

Q: Can a negative response letter be used in a bulk transfer situation? … When the circumstances allow for negative response letters, the Rule requires that the letter contain certain specific disclosures and include a 30-day notice period before the transfer takes effect.

How would you email a client who is not responding?

Hi [Client], I haven’t heard back from you on [project/opportunity] so I’m going to assume you’ve gone in a different direction or your priorities have changed. Let me know if we can be of assistance in the future. This email is helpful for a number of reasons.

How do you respond to an official letter?

Very simply sating, “I am writing in response to your letter from June 13th” is a perfect opening for a response letter.
If you aren’t the original person that the recipient wrote the letter to, state where you got the letter from.