Negative Confirmation

Filed Under: ,
Dictionary Says

Definition of 'Negative Confirmation'


A request by an auditor sent to a sample of a company's customers asking them to respond only if they find a discrepancy between their books and the account recorded on the financial statements of the company being audited. Negative conformation is used when the accounting controls of a company have historically had very few errors and are thus considered to be strong. The company is asked to double-check the numbers and only confirm if there is a discrepancy.
Investopedia Says

Investopedia explains 'Negative Confirmation'


Negative confirmation is simply a professional way for an auditor to say "don't bother me unless there is a problem." Sending out a negative conformation as opposed to a positive conformation, which requires a response, can save time that would be spent tracking replies and hounding companies that are late in responding. The accountant is just making sure both companies have the same numbers.

For example, there could be a negative request to a car manufacturer on the sale of 200 cars, which were sold to a dealership for $6 million. If this was the correct transaction, the manufacturer would not reply; if the cost price was only $5 million, the manufacturer would notify the accountant of the discrepancy in the dealership's books.

comments powered by Disqus
Hot Definitions
  1. Legal Monopoly

    A company that is operating as a monopoly under a government mandate. A legal monopoly offers a specific product or service at a regulated price and can either be independently run and government regulated, or government run and regulated.
  2. Closed-End Fund

    A closed-end fund is a publicly traded investment company that raises a fixed amount of capital through an initial public offering (IPO). The fund is then structured, listed and traded like a stock on a stock exchange.
  3. Payday Loan

    A type of short-term borrowing where an individual borrows a small amount at a very high rate of interest. The borrower typically writes a post-dated personal check in the amount they wish to borrow plus a fee in exchange for cash.
  4. Securitization

    The process through which an issuer creates a financial instrument by combining other financial assets and then marketing different tiers of the repackaged instruments to investors.
  5. Economic Forecasting

    The process of attempting to predict the future condition of the economy. This involves the use of statistical models utilizing variables sometimes called indicators.
  6. Chicago Mercantile Exchange - CME

    The world's second-largest exchange for futures and options on futures and the largest in the U.S. Trading involves mostly futures on interest rates, currency, equities, stock indices and agricultural products.
Trading Center