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Auditors need evidence of bank balances that does not pass through the client, and the bank figure rarely equals the book figure.
The auditor requests a confirmation directly from the bank under SA 505, compares it with the bank statement, and uses the client's bank reconciliation to explain any difference to the books.
Confirmation request authorised by the client, year-end bank statements, the bank reconciliation at 31 March, and the new year's statements to test clearances.
A bank balance agreed to an independent source, with every reconciling item tested and any unexplained difference reported.
A bank confirmation is the bank’s own written statement, sent straight to your auditor, of the balances, borrowings and guarantees it holds for you at the year-end. The auditor compares it with your books. Where the two differ, your bank reconciliation statement has to explain why.
It is one of the strongest pieces of evidence in an audit, because it never passes through your hands.
How is it different from a bank statement and a BRS?
| Document | Who prepares it | Source | What it proves |
|---|---|---|---|
| Bank statement | The bank, sent to you | Bank’s records | Transactions and balance, but passes through the client |
| Bank confirmation | The bank, sent to the auditor | Bank’s records | Balances, loans and guarantees at a date, independently |
| Bank reconciliation statement (BRS) | Your accountant | Books and bank statement | Why the book balance differs from the bank balance |
Under SA 505, the auditor controls the request: the auditor sends it, with your authorisation, and the bank replies directly to the auditor.
What does a confirmation cover beyond the balance?
- Balances in every current, savings and cash credit account.
- Fixed deposits, with maturity dates and any lien marked.
- Loans and overdrafts, with outstanding amounts and interest rates.
- Guarantees and letters of credit issued on your behalf.
- Security the bank holds, such as a charge on stock or property.
Items such as guarantees often appear nowhere in the books, which is why the auditor asks.
Worked example: a ₹45,000 difference
At 31 March 2026, Patel Textiles’ books show a bank balance of ₹12,40,000. The bank confirms ₹12,85,000. The difference is ₹45,000.
The BRS explains it:
| Item | Amount |
|---|---|
| Balance as per bank confirmation | ₹12,85,000 |
| Less: cheque 004512 to a supplier, issued 29 March, presented 3 April | ₹30,000 |
| Less: cheque 004514 to a transporter, issued 30 March, presented 5 April | ₹15,000 |
| Balance as per books | ₹12,40,000 |
Check: ₹30,000 + ₹15,000 = ₹45,000, and ₹12,85,000 minus ₹45,000 = ₹12,40,000.
The auditor then looks at the April bank statement and sees both cheques cleared. The difference is fully explained.
If instead the cheques had never cleared, or the BRS showed an amount with no detail, the auditor would ask for an explanation, may propose an adjustment, and could report it. A cheque is valid for three months from its date under RBI rules, so a cheque still unpresented long after that needs to be reversed in the books.
What else do auditors check in your bank reconciliation?
- Unpresented cheques: did they clear soon after year-end?
- Deposits in transit: were they credited within a few days?
- Bank charges and interest: were they booked before closing?
- Aged items: anything older than a few months is a warning sign.
- Large or round amounts: these are tested in full.
Why a clean monthly reconciliation makes this routine
If your bank reconciliation is done every month and old items are cleared as they arise, the year-end confirmation simply agrees with a BRS that has a few recent items. TransactIG matches bank statement lines to the books with an exception queue and audit-ready exports, so reconciling items are listed and dated before the auditor asks; see also reconciliation software India.
What to read next
- Statutory audit reconciliation checklist
- CARO 2020 and bank reconciliation
- What are audit working papers?
Content authored by practitioners with experience at Amazon India, Intuit QuickBooks, and the Tata Group. Meet the team →