Advanced Auditing, Assurance and Professional Ethics · Audit Evidence

Positive Confirmations, Non-Responses and Exceptions (SA 505)

Updated 5 October 2026 · Fact-checked

A positive confirmation asks the third party to reply in every case. If you decide a reply is necessary for sufficient appropriate evidence, alternative procedures cannot replace it. Without the reply, you assess the effect on your opinion under SA 705. For other non-responses, perform alternative procedures. Investigate every exception and judge the reliability of each response.

Understand Positive Confirmations, Non-Responses and Exceptions

An external confirmation is audit evidence you get directly from a third party, in paper, electronic or other form. It is usually more reliable than evidence from inside the entity because it comes from outside and you control the request and the reply.

A positive confirmation asks the recipient to reply in all cases, either agreeing the information or giving the details they disagree with. A negative confirmation asks the recipient to reply only if they disagree. Silence on a negative request proves little, because the recipient may never have read it.

The key judgment is whether a reply is necessary. Sometimes alternative procedures such as subsequent receipts can give you what you need. At other times they cannot, for example when the only reliable evidence is the third party's own confirmation of a large, unusual or disputed balance. In that case, if no reply comes, you cannot cover the gap with other work. You consider the effect on your opinion under SA 705.

Responses must be assessed for reliability. Check that the reply came directly to you, from the right party and from someone with authority. Doubts about this need further evidence. Exceptions, meaning replies that disagree with the books, are investigated to see whether they point to a misstatement, a fraud indicator or a control deficiency. Management refusal to let you send a request is also a signal: you ask why, test the reasons and consider the risk implications.

Key rules to remember

Response necessary: Positive confirmation judged necessary + no reply ⇒ alternative procedures will not give the evidence ⇒ assess the implications for the audit and the opinion under SA 705; Decide this at planning. It depends on the risk and the evidence available from other sources.
Non-response (other cases): No reply to a positive request ⇒ perform alternative audit procedures for each non-response to get relevant and reliable evidence; Examples: for receivables, subsequent cash receipts and shipping documents. For payables, subsequent payments and goods received records.
Unreliable response: Doubt about reliability ⇒ obtain further audit evidence to resolve it ⇒ if unresolved, evaluate the effect on risk of material misstatement (including fraud risk) and on the nature, timing and extent of other procedures; Doubts arise over source, authority, mode of delivery or an oral reply.
Exception: Reply disagrees with the books ⇒ investigate whether it indicates a misstatement; The cause may be a timing difference, an error on either side, fraud or a control deficiency.
Management refusal: Inquire into reasons ⇒ evaluate risk implications ⇒ perform alternative procedures; If the refusal is unreasonable, or alternative procedures give no sufficient evidence, communicate with those charged with governance and assess the effect under SA 705.
Negative confirmation use: Use alone only if ALL hold: risk of material misstatement assessed as low and evidence on operating effectiveness of controls obtained; many small homogeneous items; very low expected exception rate; no reason to think recipients will ignore the request; Even then it is weak evidence. Use it with other procedures, not as the only source for a significant assertion.

How to solve Positive Confirmations, Non-Responses and Exceptions questions

Use this method for any case question on confirmations, whether the issue is a refusal, a non-response, an unreliable reply or an exception.

1Identify the stage: the request (refusal, type of request), the reply (reliability, exception) or no reply (non-response).
2Identify the type of request, positive or negative, and the assertion and risk involved.
3Decide whether a reply was necessary for sufficient appropriate evidence. If yes and none is received, alternative procedures are not enough.
4If a reply was not necessary, list specific alternative procedures linked to the account, for example subsequent receipts for debtors.
5For a reply, test its reliability: direct receipt, right party, authority, mode, oral or written. Obtain further evidence if in doubt.
6For an exception, investigate the cause, quantify it and decide whether it is a misstatement. Consider fraud indicators and controls.
7Assess the effect on risk assessment, other procedures, misstatements and, if evidence is insufficient, the opinion under SA 705.
8Conclude in provision-facts-conclusion form and mention communication with management or those charged with governance where relevant.

Quickest way: Four-question check

When to use it: Use it in a short MCQ or a 5-mark written answer where you must name the correct action fast.

Was there a refusal, no reply, a doubtful reply or an exception?
Refusal: ask why, assess the risk effect, do alternative procedures.
No reply: was the reply necessary? If yes, think SA 705. If no, alternative procedures.
Exception: investigate the cause (timing, error, fraud, control) and decide whether it is a misstatement.

Common mistakes in Positive Confirmations, Non-Responses and Exceptions

Saying alternative procedures are always enough when a positive confirmation is not received.
Students remember the rule on non-responses but not the exception for necessary replies.
Fix: Ask first whether the reply was necessary. If yes, alternative procedures will not give the evidence, so assess the effect on the opinion under SA 705.
Accepting management's refusal without further work.
The refusal sounds reasonable, such as a dispute with the customer, and students treat it as the end of the matter.
Fix: Inquire into the reasons, test their validity, assess fraud and other risk implications, then perform alternative procedures. Go to those charged with governance if the refusal is unreasonable.
Relying on a negative confirmation alone for a significant balance.
Students see 'no reply' as 'no exception'.
Fix: Remember that negative confirmations are weak. Use them only when all the conditions are met and normally together with other procedures.
Ignoring reliability of a reply that arrived by email or phone.
A reply that agrees with the books feels like closure.
Fix: Check direct receipt, sender authority and mode. Ask for a written direct reply to an oral one, and obtain further evidence if doubts remain.
Treating every exception as an error that must be adjusted.
A difference between the reply and the books is assumed to be a mistake in the books.
Fix: Investigate the cause. A timing difference, such as a payment in transit, may not be a misstatement, but record the evidence for that conclusion.
Listing alternative procedures that do not suit the account.
Students write generic procedures without linking them to the assertion.
Fix: Match the procedure to the account: subsequent receipts and dispatch records for debtors, subsequent payments and goods received records for creditors.

Worked examples

Example 1

You are auditing a manufacturing company. A debtor with a balance of ₹48,00,000 is disputed and unusual in its terms. You sent a positive confirmation and judged a reply necessary. No reply is received after follow-up. Management says the customer has paid ₹20,00,000 after year-end. What do you do?

Show the solution

Provision: where a positive confirmation reply is judged necessary, alternative procedures will not provide the evidence required.
Facts: the balance is large, disputed and unusual, and there is no reply after follow-up. Management's statement of a post year-end receipt is a representation, not external evidence.
You may still examine the bank credit for the ₹20,00,000. That supports part of the balance, but it does not replace the confirmation on the disputed balance.
Assess the effect: you cannot get the evidence you judged necessary. Consider the implications for the audit and the opinion under SA 705, and the size of the unverified amount against materiality.
Also reassess risk, including fraud risk, because a disputed unconfirmed balance may indicate overstatement.

Answer: Alternative procedures are not a substitute because the reply was necessary. You obtain what other evidence you can, such as the bank credit for ₹20,00,000, but the unresolved balance affects the opinion under SA 705, depending on its materiality and pervasiveness.

Example 2

For a trade receivable, the books show ₹7,00,000. The customer's positive confirmation reply states ₹6,40,000 and says a cheque for ₹60,000 was sent on 29 March, the last day of the year. The company's records show the cheque was received on 3 April and recorded then. How should you treat this exception?

Show the solution

Provision: investigate every exception to decide whether it indicates a misstatement.
Facts: the difference is ₹7,00,000 − ₹6,40,000 = ₹60,000, which equals the cheque amount.
Check the date of receipt: examine the envelope or courier record, the receipt entry and the bank credit date of the cheque to confirm receipt on 3 April, after year-end.
If confirmed, the cheque was not in the company's hands at year-end and the company correctly records the balance at ₹7,00,000. This is a timing difference, not a misstatement.
If receipt was before 31 March, the books overstate debtors by ₹60,000 and it is a cut-off misstatement to evaluate and correct. Also consider whether it points to a control weakness in recording receipts.

Answer: The ₹60,000 difference is a payment in transit. If evidence confirms receipt on 3 April, it is a timing difference and no adjustment is required. If it was received before year-end, it is a cut-off misstatement of ₹60,000.

Exam tips

Start with the stage: refusal, non-response, doubtful reply or exception. This tells you which rule to apply.
Always mention the 'response necessary' condition when a question says no positive reply was received.
Write alternative procedures that match the account, and name two or three specific ones.
For exceptions, quantify the difference, state the likely cause and give a clear conclusion on misstatement.
For MCQs on negative confirmations, check whether all the conditions are met. One missing condition makes negative confirmation alone inappropriate.

Practice questions from Audit Evidence

Positive Confirmations, Non-Responses and Exceptions: frequently asked questions

When is a response to a positive confirmation necessary?

It is necessary when you judge that you cannot get sufficient appropriate evidence without it, for example on a large, unusual or disputed balance. In that case alternative procedures will not give the evidence you need. If no reply arrives, you assess the implications for the audit and your opinion under SA 705.

What should I do if a confirmation is not received?

Perform alternative procedures for each non-response to get relevant and reliable evidence. For debtors, these include subsequent cash receipts and dispatch documents. The exception is where you judged a reply necessary, because then alternative procedures are not enough.

What if management refuses to let me send a confirmation request?

Ask management for its reasons and test whether they are valid and reasonable. Evaluate the effect on risk, including fraud risk, and on your other procedures, then perform alternative procedures. If the refusal is unreasonable, or you cannot get sufficient evidence otherwise, communicate with those charged with governance and consider SA 705.

When can I use negative confirmations?

Negative confirmations alone are suitable only if the risk of material misstatement is assessed as low and controls evidence is obtained, the items are many, small and homogeneous, the expected exception rate is very low, and you have no reason to think recipients will ignore the request. Otherwise, use positive confirmations or other procedures.