External confirmation

External confirmation is the ISA 505 procedure, and a finance team in Türkiye meets it inside the independent audit regime overseen by the KGK, the Public Oversight Authority, whose BDS 505 mirrors the international standard. In practice the auditor asks banks for cash balances and asks customers and suppliers for trade balances. One detail surprises people who have only seen the request from the outside: it is normally prepared on the audited company's own letterhead and signed by a company officer. What turns it into confirmation evidence is that the auditor keeps control of the whole route — how the request is drafted, how it goes out, and where the reply lands. The reply comes straight back to the auditor, and the finance team does not sit anywhere in that path. For a subsidiary of a foreign group the same procedure also arrives from the other direction: group auditors confirming intercompany balances, a parent's shared service centre confirming an open invoice list, a bank confirming loan and collateral balances.

Confirmation season is where a reconciled ledger and an unreconciled one stop looking alike. A subsidiary that already holds an open-item list, a difference list and a stated reason behind every match turns the request around in hours; one that does not spends the busiest week of the close chasing statements out of counterparties. The reason sits in what each exercise is for. Reconciliation asks why two sets of records differ, and the answer is usually mundane: a document still in transit, a credit note nobody posted, a value date, an exchange difference. Confirmation asks a narrower question — does this balance have a counterpart that somebody outside the company will vouch for in writing? When the first question has already been answered, every gap between the reply and the ledger arrives pre-explained.

The most common misreading is to treat a confirmation as automatic proof that the balance is correct. The counterparty may report a different figure, or may not reply at all; both are results and both carry evidential weight. The second misreading is legal: a counterparty acknowledging a balance does not replace an accounting entry, does not by itself create an obligation to pay, and does not close off later claims of error or fraud. Confirmation is evidence, not settlement. The third is treating it as a year-end chore. Balances move all year, and a confirmation taken at an interim date catches a difference while it is still small enough to explain.