List the conditions which must exist before the auditors decide to use negative confirmation.?

Sure. Here are the conditions that must exist before an auditor decides to use negative confirmation:

• The assessed level of inherent and control risk is low.
• The items are similar in nature and are relatively small balances.
• There is a low probability of the external party's number not being aligned with the internal figures.
• The expectation that the third party will read and consider the confirmation.

Negative confirmations are less effective than positive confirmations, so they should only be used when the conditions above are met.

Here are some additional details about each condition:

• The assessed level of inherent and control risk is low. Inherent risk is the risk of material misstatement in an account balance or class of transactions, assuming no related controls exist. Control risk is the risk that material misstatement in an account balance or class of transactions will not be prevented or detected on a timely basis by internal controls. If the assessed level of inherent and control risk is low, then there is a lower risk of material misstatement in the account balance or class of transactions. As a result, negative confirmations are more likely to be effective in detecting material misstatements.
• The items are similar in nature and are relatively small balances. Negative confirmations are less effective for items that are not similar in nature or for items that are large in balance. This is because it is more difficult for the auditor to assess the likelihood of a material misstatement in an item that is not similar in nature or for an item that is large in balance.
• There is a low probability of the external party's number not being aligned with the internal figures. If there is a high probability of the external party's number not being aligned with the internal figures, then negative confirmations are less likely to be effective in detecting material misstatements. This is because it is more likely that the external party will not respond to the confirmation or that they will respond with incorrect information.
• The expectation that the third party will read and consider the confirmation. Negative confirmations are less effective if the third party is unlikely to read and consider the confirmation. This is because it is more likely that the third party will not respond to the confirmation or that they will respond with incorrect information.

Auditors should carefully consider these conditions before deciding to use negative confirmations.