What is the primary objective of confirmation (circularisation) in auditing?

The primary objective of confirmation, often referred to as circularisation in auditing, is to obtain audit evidence regarding the existence and rights of receivables. When auditors send confirmation requests to a company’s customers, they seek direct confirmation of the amounts recorded in the accounts receivable ledger. This process helps ensure that the receivables actually exist and that the company has the legal rights to those receivables.

By obtaining responses directly from third parties, the auditors can bolster the reliability of the evidence they collect, thus enhancing the overall credibility of the financial statements. Confirmation provides a more objective form of evidence compared to internal documents, as it reduces the risk of bias or error that could arise from relying solely on information prepared by the company being audited.

This approach is particularly critical when assessing the risk of misstatements due to fraud or error. Accurate representation of receivables is integral to a company’s financial position, and confirming these balances is a key audit procedure to validate them.

Other options do not capture the central role that confirmation plays in establishing the existence and rights to receivables. While verifying payments or checking the accuracy of sales invoices are important audit tasks, they do not specifically address the goal of confirming the existence of receivables through external