Well-designed audit confirmation practices provide valuable third-party evidence that sheds light on financial statement assertions made by company management. Confirmations can be an effective tool for auditors working with accounts including payables and receivables, inventory, investment securities, lines of credit and other actual or
contingent liabilities.

The procedures can also supply audit evidence to help determine whether complex revenue recognition arrangements or related-party transactions are appropriate and corroborate account balances and other information from financial institutions.

Once auditors have committed to using confirmations, it’s important that they design testing to trigger high response rates that meet the audit objectives. Many an audit budget has been exhausted by poorly designed confirmation procedures or excessive time spent resolving “discrepancies” that were really the result of attempting to confirm erroneous information.