What is 'Positive Confirmation'

Positive confirmation is an auditing inquiry that requires the customer to respond to the auditor whether the customer's records do or do not correspond with the auditor's records. Positive confirmation requires proof of accuracy, affirming that the original information was correct or providing the correct information if the original information is found to be inaccurate.

BREAKING DOWN 'Positive Confirmation'

Both positive and negative confirmation are used in auditing accounts receivable. Positive confirmation is the more involved of the two options, as records must be produced even if the original information was correct; it is more likely to be used if the company's books are suspected to have errors.

Positive vs. Negative Confirmation

While positive confirmation requires supporting information regardless of whether the original records are accurate, negative confirmation requires a response only if there is a discrepancy. During a negative confirmation request, a business may be asked to confirm that an account balance is listed at a specific amount, such as $100,000. If the account balance currently reflects the amount as $100,000, then no additional action is required to satisfy the request. If the balance reflects any amount aside from $100,000, additional information must be provided to justify the difference.

Negative confirmation is more commonly used if the individual's or business's records are generally considered to be highly accurate by nature, often based on stringent internal requirements or business practices.

Confirmation Analysis

An auditor can verify the accuracy of the accounts receivable records being examined by seeing if those books correctly reflect transactions that have occurred between the company and its customers. Contacting customers directly helps auditors verify that accounts listed actually exist, that balances shown as owed are correct and that payments marked as received are accurate.

If a company wishes to audit its accounts payable records, it must review any outgoing funds associated with debt obligations or creditor payments. This may require a review of billings and reconciling those amounts with payments that were recorded as being made. Additionally, the business may choose to match the aforementioned amounts to actual withdrawals from any payment accounts to confirm accuracy.

Example of Positive Confirmation

If an individual or business entity is selected for an audit by the Internal Revenue Service (IRS), the taxpayer must produce records to affirm the information listed on the selected tax returns. This includes positive confirmation of all sources of income, applicable deductions that were taken, and proof of claimed gains or losses. Even if the information required for the audit matches what was reported, all evidence must be submitted to satisfy the audit requirements.

  1. Negative Confirmation

    Negative confirmation is a method of communication that requests ...
  2. Audit

    An unbiased examination and evaluation of the financial statements ...
  3. Generally Accepted Auditing Standards ...

    Generally Accepted Auditing Standards are a set of guidelines ...
  4. Auditability

    The ability to achieve accurate results in the examination of ...
  5. Internal Audit

    The examination, monitoring and analysis of activities related ...
  6. Auditor

    An official whose job it is to carefully check the accuracy of ...
Related Articles
  1. Personal Finance

    Financial auditor: Job details and average salary

    Discover what it means to hold a financial auditor position, including job duties, education and training, required skills and expected salary.
  2. Personal Finance

    Career advice: Accounting versus auditing

    Understand the distinctions between accounting and auditing, and learn what each offers new graduates in terms of salary, job security and daily life.
  3. Managing Wealth

    Internal Auditor: Job Description & Average Salary

    Learn about what the job of internal auditor entails, as well as the median salary, education and certifications required and future career path.
  4. Taxes

    What To Do If You Get Audited

    If you're in the minority of those that get audited, find out how to prepare and how to handle the process.
  5. Taxes

    Audit Stories You Won't Believe

    Take comfort: Even if you do get audited, you'll have an easier time that these unlucky taxpayers.
  6. Managing Wealth

    Make $1 Million? Expect an Audit

    If you make $1 million or more, the IRS has its eyes on you. Here's what you can do about it.
  7. Taxes

    How To Appeal Your IRS Audit

    The auditor's review isn't always the last word. Many taxpayers who are audited can successfully appeal their audits and save thousands of dollars.
  8. Tech

    An Inside Look At Internal Auditors

    Find out why these number crunchers are part of every chief officer's dream team.
  9. Financial Advisor

    SEC Audit? No Problem (If You're Prepared)

    Audits are unwanted and unpleasant, but by getting your proverbial ducks in a row ahead of time you can ease and simplify the process.
  10. Financial Advisor

    Advisors: Warn Clients About These Audit Triggers

    There are several factors that may increase the risk of an audit, especially with high-net-worth clients.
  1. What should I do to prepare for an IRS audit?

    Find out how to prepare for an IRS audit, what kinds of audits you might face and what kinds of habits you should develop ... Read Answer >>
  2. What is an IRS letter audit / audit by correspondence?

    Learn about IRS letter audits, how tax returns are selected for audits and the common outcomes in the letter audits conducted ... Read Answer >>
  3. What technical indicators can be used to confirm the tendency of a stock?

    Find out what signal confirmation is and some common strategies used to confirm trading signals concerning the tendency of ... Read Answer >>
  4. What's the average salary of an audit clerk?

    Learn how much audit clerks earn per year on average, and review what these finance professionals and others in similar fields ... Read Answer >>
  5. How is the Federal Reserve audited?

    Learn how the Federal Reserve gets audited. Due to gridlock, the Federal Reserve has been forced to take on the role of stimulating ... Read Answer >>
Hot Definitions
  1. Call Option

    An agreement that gives an investor the right (but not the obligation) to buy a stock, bond, commodity, or other instrument ...
  2. Standard Deviation

    A measure of the dispersion of a set of data from its mean, calculated as the square root of the variance. The more spread ...
  3. Entrepreneur

    An entrepreneur is an individual who founds and runs a small business and assumes all the risk and reward of the venture.
  4. Money Market

    The money market is a segment of the financial market in which financial instruments with high liquidity and very short maturities ...
  5. Perfect Competition

    Pure or perfect competition is a theoretical market structure in which a number of criteria such as perfect information and ...
  6. Compound Interest

    Compound Interest is interest calculated on the initial principal and also on the accumulated interest of previous periods ...
Trading Center