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Articleship students and junior accountants are asked to send balance confirmations but are unsure what the letter must contain and what to do when replies differ.
A confirmation states the balance per your books on a date and asks the party to agree or give its own figure; each difference is traced to a missing or mistimed entry on one side.
A standard letter with party name, GSTIN, date, balance per books, invoice list, reply-by date and signature block, plus a tracker of letters sent, replies and differences.
Independent evidence for the audit file and a list of unrecorded items, such as returns or credit notes, booked before the accounts are finalised.
A balance confirmation letter asks a customer, supplier or bank to confirm the balance shown in your books on a stated date, usually 31 March. Auditors use the reply as independent evidence that the balance is real. Your own team uses it to find unrecorded items before the accounts are finalised.
This article covers letters to customers and suppliers. Bank letters work a little differently and are covered in what is a bank confirmation in an audit.
Who sends it, and what is the difference between positive and negative confirmation?
The business prepares the letter on its letterhead because the party will only share details with you. For audit evidence, though, the auditor should control the process: choose which parties to confirm, post or email the request, and receive the reply directly. In India this is covered by Standard on Auditing SA 505, External Confirmations, issued by ICAI.
| Type | What the party is asked to do | Strength of evidence | When used |
|---|---|---|---|
| Positive confirmation | Reply in every case, agreeing or stating its own balance | Stronger | Large or risky balances |
| Negative confirmation | Reply only if it disagrees | Weaker | Many small, low-risk balances |
A positive request can also be “blank”: it leaves the balance empty and asks the party to fill in its own figure. That avoids the party simply signing whatever you sent.
What should the letter contain?
| Field | Why it matters |
|---|---|
| Party’s legal name and address | Confirms you are writing to the right entity |
| Party’s GSTIN | Avoids confusion between branches of the same group |
| Confirmation date | The balance is only meaningful on a specific date, such as 31 March 2026 |
| Balance per your books, and whether it is debit or credit | The figure the party agrees or disputes |
| List of open invoices or a statement of account | Helps the party find differences quickly |
| Reply-by date | Typically 10 to 15 days, so the audit is not held up |
| Reply address (often the auditor’s) | Keeps the reply independent |
| Signature and stamp block for the party | Shows the reply came from an authorised person |
A worked example: a ₹35,000 difference
Your books show a customer owing ₹4,86,200 on 31 March. The customer replies confirming ₹4,51,200.
The difference is ₹4,86,200 − ₹4,51,200 = ₹35,000.
You compare the customer’s statement with your ledger invoice by invoice. Every invoice matches. Then you find a goods return: the customer sent back goods worth ₹35,000 on 28 March and issued a debit note. Your store received the goods, but no one booked the sales return or the credit note.
You pass the entry (with the GST reversal on the credit note), and the balance falls to ₹4,51,200. Without the letter, sales and debtors would both have been overstated by ₹35,000 in the year-end accounts.
What do you do when the party does not reply, or replies with a different balance?
No reply:
- Send a reminder after the reply-by date, and try a phone call or a second email address.
- If there is still no reply, the auditor performs alternative procedures: checking payments or receipts after 31 March against the invoices, and looking at invoices, delivery challans and GRNs.
- Record the outcome in the audit file.
Different balance:
- Ask for the party’s statement of account for the period.
- Match both sides line by line and list each difference.
- Sort each one: a timing difference (for example, a payment in transit), a missing entry on your side, or a missing entry on theirs.
- Pass correcting entries for your side, and send a note to the party for theirs.
- Escalate genuine disputes, such as rate or quantity disagreements, to the business owner.
What to read next
- Statutory audit reconciliation checklist shows where confirmations sit in the audit file.
- Internal audit of reconciliation explains how internal auditors test confirmations during the year.
- For keeping customer and supplier balances reconciled all year, see account reconciliation software India.