## SA 505 – External Confirmations

### What are External Confirmations?

External confirmations are audit evidence obtained as a direct written response to the auditor from a third party (the confirming party), in paper or electronic form.

SA 500 recognises that the reliability of audit evidence is influenced by:

Its source (external > internal)
Its nature (documentary > oral)
The circumstances under which it is obtained

External confirmations are therefore among the most reliable forms of audit evidence.

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### Objective of the Auditor (SA 505)

To design and perform external confirmation procedures to obtain relevant and reliable audit evidence.

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### Structure of SA 505 (Overview)

#	Component
I	Objective
II	Definitions
III	Important Terms
IV	Uses of External Confirmation
V	Procedures (Steps 1–4)
VI	Management's Refusal to Send External Confirmation
VII	Results of External Confirmation Procedure
VIII	Negative Confirmations

### Steps in the External Confirmation Process

1. Determine information to be confirmed

2. Select the confirming party

3. Design the confirmation request (positive/negative)

4. Send requests including follow-ups for non-responses

> Further detail on each step, management refusals, and types of confirmations is covered in subsequent sections of SA 505.

Worked example

### Example 1

Why external confirmation is preferred: If an auditor wants to verify the year-end balance of a bank account, they can:

(Option A) Read the bank statement provided by the client → internal evidence, potentially manipulated
(Option B) Send a bank confirmation request directly to the bank → external evidence obtained independently

SA 505 requires Option B because the reliability of evidence is higher when it comes from an independent external source without passing through the client.

⚠️ Common exam mistakes

Treating external confirmation as mandatory in all audits — SA 505 requires the auditor to consider whether external confirmations are appropriate, not to apply them in every case
Confusing positive and negative confirmations — positive requests require the party to respond in all cases; negative requests only require a response if the party disagrees
Thinking SA 505 is standalone — it works in conjunction with SA 500 (Audit Evidence), which governs the general reliability framework

Bare-Act text Objective (Paragraph 7) · SA 505 – External Confirmations · click to expand

The objective of the auditor, when using external confirmation procedures, is to design and perform such procedures to obtain relevant and reliable audit evidence.

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SA 505 – External Confirmations: Concept & Objective

Worked example

⚠️ Common exam mistakes