Question

Distinguish between positive and negative confirmations. Under what circumstances would positive confirmations be more appropriate than negative confirmations?

Answer 1

Negative confirmation is more frequently employed when the records of the person or business are usually thought to be quite accurate.

What is the difference between negative and positive confirmations?

Only when the customer disagrees with the amount owed to the client is a negative confirmation requested. When an account has substantial individual balances or when errors are anticipated due to a high control risk, positive confirmations are typically used.

Negative confirmation is more frequently employed when the records of the person or business are usually thought to be quite accurate. The corporation that receives a negative confirmation is typically thought to have strict internal policies and business procedures. As a result, since auditors typically only need to send out one letter, negative confirmation is far less expensive and time-consuming for them.

Positive confirmation requests, on the other hand, are more complicated since financial documents must be provided, even if the information in the original letter was accurate. Additionally, if there are doubts about the accuracy of the company's books, positive confirmation requests are more likely to be used.

However, because it is more precise and makes sure that everyone is on the same page—or has the same financial information—a positive confirmation letter is more typical in complex transactions. For instance, auditors in lending employ affirmative confirmations from banks and businesses to determine the precise amount of a loan.

Because it is a specific request that the recipient has responded to, a positive confirmation typically represents the financial information better than a negative confirmation. A positive confirmation is tangible proof that the information was confirmed in the event of a disagreement.

To learn more about negative and positive confirmations refer to:

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