Debtor confirmations: when nobody replies
What an audit team does when a receivables confirmation is not returned or comes back with a difference, and which alternative procedures will do.
By Achekam · · 5 min read · For Accountants & audit firms in South Africa, Nigeria, Kenya
The confirmation round went out in good time. A few weeks later, some customers have replied and agreed their balances, a couple have replied with differences, and the rest have said nothing. Chasing them has produced an out-of-office reply and a promise to "look into it". The fieldwork deadline is next week. The temptation is to note "no reply received" on the schedule and move on.
ISA 505 does not allow that. A non-response is not evidence, and a difference is not resolved by being listed. This article covers what to do with both, starting with the choices made before the requests go out.
Positive and negative confirmations
A positive confirmation asks the debtor to reply in every case, either agreeing the balance or stating a different one, or filling in the balance themselves. A negative confirmation asks the debtor to reply only if they disagree.
Negative confirmations give much weaker evidence, because silence may mean agreement or may mean the request was ignored. ISA 505 allows them as the sole substantive procedure only when all of the following hold: the risk of material misstatement is assessed as low and the related controls have been tested; the population is a large number of small, homogeneous balances; a very low exception rate is expected; and the auditor is not aware of circumstances that would make recipients disregard the requests. For most small and medium clients with a handful of significant customers, positive confirmations are the right tool.
Selecting balances to confirm
Selection decides how much a non-reply will hurt. A sensible approach:
- confirm every balance above a level set by reference to performance materiality, as specific items;
- sample the remainder, so the population as a whole is covered;
- add balances with particular risk: credit balances, long-overdue amounts, related parties, unusual year-end invoices.
Where the client's books are on Achekam, receivables are aged into 0-30, 31-60, 61-90, 91-120 and over 120 days, with overdue totals, which helps target older balances and those where the risk is valuation rather than existence.
For the sampled part, Achekam's Audit Intelligence risk-scores a loaded population and proposes a sample; a reviewer who did not prepare the plan approves it before the draw, and every draw can be reproduced from its stored seed. No size is proposed without approved materiality and a confidence level.
In External Confirmations, staff plan the confirmations and prepare the requests, a different person approves them, and each respondent answers through a single-use link. Achekam does not send the requests itself: the team sends them and records how. The overall process is covered in external confirmations and component auditors by link.
Following up non-replies
ISA 505 expects the auditor to follow up non-responses before concluding that no reply will come. Send a second request, by the same or a different route. Telephone the debtor's accounts department and ask them to reply through the link. Check that the address was right; a non-reply from an address the client supplied is a reason to verify the contact, not just to resend.
If there is still no reply, the auditor performs alternative procedures designed to obtain relevant and reliable evidence about the balance.
One exception matters. If the auditor has decided that a positive confirmation response is necessary to obtain sufficient appropriate evidence, typically because the balance carries a significant risk that only the debtor can address, alternative procedures will not provide the evidence needed. A non-reply then has implications for the audit and possibly for the opinion.
Alternative procedures: receipts after year end and documents
For receivables, the most persuasive alternative is evidence that the debtor paid:
- Receipts after year end. Trace cash received after year end to the bank statement and match it to the specific invoices that made up the year-end balance. A payment "on account" that cannot be matched to invoices is weaker.
- Shipping and delivery documents. For invoices not yet paid, agree to signed delivery notes or proof of service, and to the customer's order or contract.
- Correspondence. Remittance advices, statements acknowledged by the customer, and e-mails confirming orders.
Be careful with documents that only the client generated. A sales invoice proves that the client raised an invoice, not that the customer owes the money. The receipt from the customer's bank account is the strongest evidence on most files.
Investigating differences
A reply that disagrees with the balance is useful evidence, provided the difference is investigated. Most fall into a few categories:
| Cause | Example | Response |
|---|---|---|
| Timing: cash in transit | Debtor paid on the last day of the year | Agree to the bank statement after year end |
| Timing: goods in transit | Goods dispatched but not yet received | Agree to the delivery note date and terms |
| Dispute | Debtor rejects part of an invoice | Consider a credit note or impairment |
| Error | Invoice posted to the wrong customer | Propose an adjustment |
| Possible fraud | Debtor has no record of the invoice | Treat as a significant matter |
Record differences that are misstatements as findings. In Achekam, findings can be raised from a working paper and closed or withdrawn, and staff can record an audit adjustment on a lead schedule line with a reason. If a sampled balance is misstated, the error is projected to the sampled population, not treated as a one-off. A difference that reveals a recoverability problem belongs in the impairment work, discussed in trade receivables impairment.
On the work item, a step is marked done only with a written response and its documents, or set aside with a reason; steps are never deleted. For each non-reply, the response should state what follow-up was done, which alternative procedures were performed and what they showed.
The full text of ISA 505 on external confirmations is in the IAASB's 2026 Handbook, which includes the complete International Standards on Auditing.
Before the next confirmation round
Send confirmations earlier than feels necessary and diarise the follow-up for the day the first replies are due. Many non-replies are a timing problem that becomes an evidence problem only because nobody chased in time.
General guidance only, not advice on your own circumstances. Tax and payroll rules change: check the current position with the authority or your adviser.
