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CA Ravi Taori
Factors to consider when Designing Confirmation requests

4.Sending Requests
Properly Addressed: Determine that requests are properly addressed to third parties and also return address of
auditor, including testing the validity of some or all addresses on confirmation requests before sending.
Follow-Up: Send an additional or follow-up confirmation request when a reply to a previous request has not
been received within a reasonable time, after re-verifying the accuracy of the original address.

(CNO-SA505.060) Negative Confirmations
Definition: A request that the confirming party respond directly to the auditor only if the confirming party
disagrees with the information provided in the request
Evidence Quality: Less persuasive than positive confirmations.
Sole Audit Procedure: Not the sole audit procedure if there is RMM, unless ALL of the following conditions
are fulfilled (Shortcut PE invests in RCB)
• Population Homogeneity: Large number of small, similar balances or transactions.
• Exception Expectation: Anticipate a very low exception (Mismatch) rate.
• Risk Assessment: Risk of material misstatement is low.
• Control Effectiveness: Sufficient evidence of effective relevant controls.
• Recipient Behaviour: No known reasons for recipients to ignore requests.

(CNO-SA505.080) Reliability of Responses
1. Doubts Over Reliability: Auditor identifies factors causing doubts over reliability of response to
confirmation request.
2. Further Evidence: If doubts exist, obtain further audit evidence to resolve them. Determine if a response to
a confirmation request is reliable.
3. If not reliable: If not reliable, evaluate implications on assessment of risks of material misstatement (RMM)
and risk of fraud (ROF).
4. Adjust NTE: Adjust the nature, timing, and extent of other audit procedures to obtain sufficiency and
appropriateness (S&A) evidence.

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