AICPA updates confirmation standards, KPMG audit teams face new cash evidence rules

Cash confirmations are no longer a routine checkbox on KPMG audit teams’ evidence lists. The AICPA Auditing Standards Board approved a standards update on May 14 that requires external confirmation procedures for cash and cash equivalents held by third parties unless certain conditions exist, a change that will push seniors and managers to spend more time upfront on third-party access, timing, and fallback documentation.

For audit teams, the practical shift is immediate. Confirmations often sit at the center of bank accounts, custodial arrangements, escrow balances, trustees, and other relationships where the client does not control the underlying records. The new standard raises the pressure on engagement teams to map those relationships early, set expectations with clients about response times, and preserve a clean trail when a confirming party is slow to respond or unavailable. When a bank, trustee, or other holder does not send back a confirmation, the team will need a sharper explanation of what alternative evidence was used and why it was sufficient.

The AICPA had already put the issue out for public comment on February 27, 2025, signaling that the profession was moving toward a tighter confirmation framework well before the May 14 approval. The update also brings the nonissuer GAAS framework closer to the Public Company Accounting Oversight Board’s modernized confirmation standard, which the PCAOB adopted in September 2023 and made effective for audits of fiscal years ending on or after June 15, 2025.

That PCAOB standard requires confirmation of cash and cash equivalents held by third parties or other relevant and reliable audit evidence obtained directly from a knowledgeable external source. The board said its goal was to improve audit quality and reflect the way confirmation work now happens, including electronic communications and third-party intermediaries. For KPMG teams, that means confirmation planning is no longer just about sending a request and waiting. It increasingly involves deciding whether digital workflows, direct source access, or a manual follow-up chain will produce the strongest evidence with the least friction.

The profession did not move to this point without debate. EY supported the presumptive requirement for confirming cash and cash equivalents held by third parties, but recommended removing proposed exceptions to reduce the risk of misapplication. EY also said direct access to knowledgeable external-source information should be treated as an alternative method rather than folded into the definition of external confirmation. The final result leaves audit firms with more pressure to document judgment calls carefully, especially when the cleanest evidence path is not the fastest one.