Examples of external confirmations In Auditing

External Confirmation

Examples of external confirmations In Auditing
Examples of external confirmations In Auditing

External confirmation-Audit

External confirmation may be a progression of getting proof by auditor straightly from a 3rd party in written (on paper, electronic, or another medium).

Whether or not to use verification as Audit confirmation:

External authentication is usually used in audit events because it supplies the most reliable proof (being on paper, exterior, and direct proof).

However, external confirmation isn't a required procedure and the auditor may omit it in the following situations:

·When there's no or low danger of material misstatement.

·When balance is not material.

·When verifying gathering doesn't have aptitude, impartiality or

·Willingness to respond.

·When evidence is often obtained from other substantive procedures.

·When the administration appeals to the auditor to not send authentication appeals and there's a reasonably priced justification for this.

A condition where exterior corroboration events may provide pertinent audit proof.

Usually, a confirmation procedure is employed to verify information from:

· Debtors/Creditors

· Banks

· Lawyers

· Catalog/funds/land heading deeds detained by 3rd parties.



Confirmations provide strong evidence for this assertion.


Verification may supply strong proof for this claim. if major parties with low down/zero/unenthusiastic balances are also selected.

This may identify unrecorded transactions.

Valuation and Allocation

Authentications offer weak proof for this allegation just in case of debtors (because nonpayer may go broke and can still acknowledge the amount)

Rights and Obligations

Confirmations provide weak evidence for this assertion just in the case of debtors (because debtors may are discounted).


The auditor shall maintain control over the confirmation process i.e. he shall

· Select the appropriate confirming parties.

· Decide the information to be confirmed

· Design the confirmation request

· Send the confirmation himself.

The auditor shall decide;

1. About the timing of confirmation

2. Number of customers to be confirmed

3. Confirmation method to be used.

Timing of Confirmation:

Confirmations can be sent:

-at year-end (to confirm year-end balance)

-before year-end

If confirmations are sent prior to year-end, the following further procedures are performed at year-end to ensure that intervening transactions are not materially misstated:

1. Obtain break-up of balances (i.e. party-wise detail) at year-end

2. evaluate it with temporary date equilibrium and examine the strange differences.

3. Attain of dealings for the provisional era.

4. Choose a sample of dealings and confirm them.

5. Consider the need for additional confirmations at year-end (e.g. if balances have significantly increased).

Confirmation Method to be used

Generally, there are 2 types of authentication necessities that are working by reviewer i.e.

1. Positive Confirmation Request

2. Negative Confirmation Request.


Positive Confirmation Request

A stipulate to agree with festivity to the response. whether he harmonize or distress with the facts supply within the stipulated. (i.e. The hopeful corroboration require a reply in all cases).

Risk is - Verify party may reply without owing confirmation.

Negative Confirmation Request

A demand to verify party to reply only the verify party diverges with the information made available within the demand. (i.e.) The unresponsive verification obligations a reply only in case of deviation)

Risk is-

The proof is less dependable as compared to optimistic verification because the nonattendance of response may also be because:

(a)Requests may be lost in transit.

(b)Parties may disregard requests to avoid efforts. 

(c)Parties usually do not reply if disagreement is in their favor (e.g. if deposits are overstated).


Audit Procedures include the following:

1. Gain a list of equilibrium and check the correctness and wholeness of the catalog.

2. If inhabitants aren't all the same, stratification of inhabitants should be made.

3. An appropriate sample selection method should be used. I choose the example, the following types of accounts should be measured for addition:

a. Material balances

b. Nil balances or Negative balances.

c. Overdue accounts.

d. Accounts with unusual activities e.g. with great disparity in balances or with ‘round’ expenses.

4. Corroboration mail should be ready for selected revelry.

5. Management’s authority should be obtained.

6. Mail should be sent with the recurring mail address of the assessor.


When charges the fallout of exterior verification require, the appraiser may classify such penalty as follows:

a) A response indicating agreement

b) A response indicating Exception

c) A non-response

A response indicating agreement:

If response assigns conventionality, it forms sufficient suitable audit verification. No additional work is desirable.

A response indicating Exception:

Exception means retorts that point to a difference between in order to ask to be confirmed and information confirmed by the verifying party. The auditor shall explore exceptions to conclude whether they are misstatements or not.


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