Positive and Negative Confirmations and Considerations for Customized Security Structure

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Discussion Topic 1
Auditors solicit third-party validation of financial statement balances by sending clients reports to reduce the risk of substantial misrepresentation. The positive and the negative confirmation are the two forms of requests. A positive confirmation is when the client must return a document verifying or contesting the account facts presented by the auditor. Because auditors want to be particular about the final debt levels stated by their customers, a negative confirmation is seldom utilized (Jonhnstone et al., 2015). Otherwise, it's instrumental when a firm's financial statement records have traditionally had minimal mistakes and are therefore regarded as solid. Corollary negative confirmation is far less expensive and time-consuming for auditors because they only have to send one document.
On the other hand, positive confirmation queries are more complicated since financial documents must be provided, even if the material in the inquiry was accurate. In other words, Positive confirmation necessitates supplementary information regardless of the original records' correctness, while negative confirmation necessitates a statement only when there is a contradiction. If the firm's records are believed to have problems, positive confirmation requests are more likely to be utilized. This implies that positive confirmation is more trustworthy since the auditor may carry out follow-up processes if the debtor does not respond to subsequent inquiries.
The two are similar in that they involve a receipt by the customer, a written or oral r...