Negative Confirmation

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Definition of 'Negative Confirmation'

A negative confirmation is a type of audit evidence that is used to verify the accuracy of information that is provided by a third party. The third party is sent a request for information, and if they do not respond, it is assumed that the information is correct. Negative confirmations are often used when the auditor does not believe that the third party is reliable or when the information is sensitive.

There are several advantages to using negative confirmations. First, they are less expensive than positive confirmations, which require the third party to respond to the request for information. Second, they are less intrusive than positive confirmations, which can sometimes damage the relationship between the auditor and the third party. Third, negative confirmations can be used to verify a wider range of information than positive confirmations.

However, there are also some disadvantages to using negative confirmations. First, they are less reliable than positive confirmations, because there is no way to verify that the third party actually received the request for information. Second, negative confirmations can be ineffective if the third party is not aware of the request for information. Third, negative confirmations can be time-consuming to process, especially if there are a large number of third parties involved.

Overall, negative confirmations can be a useful tool for auditors, but they should be used with caution. Auditors should carefully consider the advantages and disadvantages of negative confirmations before deciding whether to use them.

Here are some additional details about negative confirmations:

* Negative confirmations are typically used for accounts receivable, accounts payable, and inventory.
* The request for information is typically sent in writing.
* The third party has a certain amount of time to respond to the request for information.
* If the third party does not respond to the request for information, it is assumed that the information is correct.
* Negative confirmations can be used to verify a wide range of information, including amounts, dates, and descriptions.
* Negative confirmations can be used to verify information that is provided by both internal and external third parties.
* Negative confirmations can be used to verify information that is both sensitive and non-sensitive.

Negative confirmations are a valuable tool for auditors, but they should be used with caution. Auditors should carefully consider the advantages and disadvantages of negative confirmations before deciding whether to use them.

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