What is a Positive Confirmation?

A positive confirmation is an inquiry made by an auditor to a third party that requires a response. The inquiry is in regard to whether the third party's records match those that the auditor is examining. The auditor usually provides a numeric balance in the confirmation, which is the amount stated in the client’s records. A variation on the concept is the “blank” confirmation, where no numeric balance is provided; instead, the auditor requests that the third party write its own balance in the confirmation document.

Even if there is a match, with no exceptions, the auditor still requests a response. Positive confirmations are usually associated with the audit of receivables, payables, and debt arrangements.

Example of a Positive Confirmation

Here is a sample text for a positive confirmation:

[Company Letterhead]
[Date]
[Third Party's Name]
[Third Party's Address]

Subject: Confirmation of Account Balance

Dear [Third Party's Name],

As part of our annual audit of [Client Company Name] for the year ending [Fiscal Year-End Date], we kindly request your confirmation of the following information. Our audit is being conducted in accordance with generally accepted auditing standards, and your cooperation is essential to ensure the accuracy of our client's financial records.

According to [Client Company Name]’s records, your account balance with them as of [Fiscal Year-End Date] is:

Account Number: [Account Number]
Balance: $[Amount]

Please indicate whether this information is correct by marking the appropriate box below and returning this letter directly to us using the enclosed pre-addressed envelope or via email to [Auditor's Email Address].

☐ Yes, the balance is correct.
☐ No, the balance is incorrect. If incorrect, please provide the correct amount: $_________ and an explanation of the difference.

We appreciate your assistance and request that you respond by [Response Deadline Date]. If you have any questions, please do not hesitate to contact us at [Auditor's Contact Information].

Thank you for your cooperation.

Sincerely,
[Auditor's Name]
[Audit Firm Name]
[Audit Firm Contact Information]

Positive Confirmation vs. Negative Confirmation

The other type of confirmation is a negative confirmation, where the third party only has to respond if there is a discrepancy between its records and those contained within the confirmation document. A positive confirmation is considered to represent a higher quality of evidence than a negative confirmation, since the auditor receives explicit evidence from the third party.