When would you use positive versus negative confirmations, and why are negative confirmations weaker evidence?
A core Audit & Assurance interview question — asked in analyst and associate interviews across IB, PE, and the Big 4.
THE SHORT ANSWER
A positive confirmation asks the respondent to reply whether they agree or disagree with the stated balance (or to provide the balance), so you get evidence either way — non-replies are followed up with alternative procedures. A negative confirmation asks the respondent to reply only if they disagree, so silence is taken as agreement. Negative confirmations are weaker because a non-response is ambiguous — it could mean agreement, or that the request was never received, ignored, or the recipient simply didn't bother — so silence doesn't actually corroborate the balance. ISA 505 therefore restricts negative confirmations to situations with low assessed risk, effective controls, a large number of small homogeneous balances, a low expected exception rate, and no reason to think recipients will disregard them. For higher-risk or larger balances you use positive confirmations. The principle: positive gives affirmative evidence; negative only surfaces disagreements that bother to reply.
WHAT INTERVIEWERS LISTEN FOR
- ✓Positive: reply either way; non-replies get alternative procedures
- ✓Negative: reply only if disagree; silence = assumed agreement
- ✓Negative is weak — non-response is ambiguous
- ✓Negatives only for low-risk, many small homogeneous balances (ISA 505)
COMMON MISTAKES
- ✗Using negatives for high-risk/large balances
- ✗Treating silence on negatives as strong evidence
- ✗Not following up non-replies on positives
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