What type of evidence does external confirmation provide in auditing?

External confirmation provides written third-party responses, which is crucial in the auditing process. This type of evidence comes directly from independent sources outside the organization, such as banks, customers, or suppliers, confirming the accuracy of financial information reported by the company. For instance, if an auditor requests a confirmation of account balances from a bank, the written response they receive serves as direct evidence of the amounts held at that financial institution, which adds credibility to the financial statements.

This method enhances the reliability of the evidence obtained, as it reflects independent verification, thereby reducing the risk of collusion or fraud. The confirmation can affirm various aspects of the financial statements, including receivables, payables, and account balances, which are pivotal during the audit process. External confirmations also provide the auditor with firsthand information, which helps ensure that the financial data is accurate and free from misstatement. Hence, this form of evidence is fundamental to building an effective audit strategy and ensuring that the auditor's conclusions are well-supported.