November 10, 2025
During future audits, you might notice your auditor requesting more external confirmations of your bank accounts, receivables, or other balances. To help you understand these changes, this article summarizes coming updates to auditing standards surrounding confirmations.
In 2023, the Public Company Accounting Oversight Board (PCAOB) adopted new standards to modernize audit confirmation requirements. In response, the AICPA’s Auditing Standards Board (ASB) recently proposed changes to Generally Accepted Auditing Standards (GAAS): AU-C sections 330, 500, and 505. These proposed updates align GAAS confirmation standards with the PCAOB’s standards. If accepted, the changes will affect audits of nonpublic companies.
The most significant change requires auditors to perform external confirmations of cash and cash equivalents held by third parties. Confirmations are not required if the accounts are not significant or if the confirming party consistently ignores confirmation requests. If confirmations are not completed, auditors need to clearly document the reasons for not confirming cash or accounts receivable balances.
The proposed standard also clarifies what counts as a reliable confirmation. For example, it clarifies that if intermediaries are used, auditors must assess their reliability. It also clarifies that direct account access provided by management cannot be considered an external confirmation but can still be used as supporting evidence. Finally, the standard emphasizes that confirmations may be used for assertions other than cash and receivable balances, including disclosures, estimates, contracts, and more.
Hopefully this article provided some insight as to why you may receive more confirmation requests during your next audit. If you have further questions about audit procedures, feel free to ask your audit team and we will be happy to help. Larson and Company has developed a suite of services specifically to serve the needs of companies of all sizes in a wide range of industries.