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The confirmation process is a key audit procedure used to gather direct evidence from third parties about account balances or transactions. In the context of auditing accounts receivable, confirmations are sent to customers to verify whether the amounts recorded by the client are accurate and valid.

There are two main types of confirmations: positive confirmations and negative confirmations.

Positive Confirmations request a response regardless of whether the recipient agrees with the stated balance. These are typically used when individual account balances are large, there is reason to doubt the client's records, or internal controls are weak. The benefit of positive confirmations is that they provide stronger audit evidence, especially when responses are received.

Negative Confirmations ask for a response only if the recipient disagrees with the stated amount. These are more efficient but provide less assurance than positive confirmations. They are usually used when internal controls are strong, the risk of material misstatement is low, and the account balances are small or numerous.

The confirmation process helps auditors address key financial statement assertions such as existence, accuracy, and rights and obligations. It is especially valuable in detecting overstatements or potential fraud in accounts receivable and other balances that involve third parties