What is the confirmation of receivables?

Confirmation of receivables is a technique used in the audit process to verify the company's records. The auditor sends communication directly to customers and asks them to confirm the records kept. This allows auditors to control errors that can range from deliberate falsification to poor records. Such evidence may be particularly valuable because it comes from a third party outside a company that is not interested in the outcome of the audit and therefore can theoretically rely on the provision of the right information.

There are two types of receivables confirmation. In a positive application, the auditor asks the client to answer, confirm the accuracy of the information or correct it if it is bad. Negative requirements indicate that clients should only respond if an error occurs; The auditor assumes that the information is correct if there is never any answer. One mistake with this approach is that clients can be reluctant to write auditors, in which case the absence of evidence does not mean that gingerAmy companies are accurate.

6 The company supplies the names and addresses of clients and the auditor sends confirmation paperwork of receivables. Clients are asked to directly answer the auditor, not to society, so paperwork never runs through the hands of people who could have a conflict of interest. The auditors assemble information, check it against records, and use it in the final audit report to express their opinion on the status of the company's books.

The selection process for which clients should obtain confirmation of receivables can be a mixture of carefully selected goals and random. Very large and past accounts can be in more detail are particularly special interest. Auditors can also randomly choose from smaller accounts in good condition to get a more general picture of the company's finance.

Using confirmation of receivables can provide a lot of valuable evidence of audit. But it is not without shortcomings because the clothNTIs can refuse to respond to the request, or the company may have incorrect contact information, which means they will never reach the requirements. The auditors may have to spend considerable time to examine and monitor specific clients to collect data, which can increase the cost of audit.