Related-Party Balance Confirmation Difference: Ledger, Contract and Disclosure Reconciliation
By Ravi Sisodia · Reviewed by CA Divyanshu Sengar · Updated 5 October 2026
India-first finance, audit and risk workflow with primary-source anchors.
2-minute summary
- The reconciliation should start from both parties’ ledgers and contracts, not from a management-provided net number. Each reconciling item should be attributed to timing, accounting policy, invoice dispute, unrecorded transaction or genuine disagreement.
- SA 505 external-confirmation principles make the response process relevant audit evidence, but a confirmation from a related party may require additional corroboration because independence and common control affect reliability.
- Once the amount is reconciled, finance should still verify whether the transaction and year-end balance are completely captured in related-party disclosures and whether terms require separate disclosure.
Current position
Control and decision map
| # | Control / decision step |
|---|---|
| 1 | Obtain separate ledger extracts from both entities and map common document references. |
| 2 | Reconcile invoices, credit notes, interest, foreign exchange and cash settlements line by line. |
| 3 | Trace timing differences to post-year-end bank / invoice evidence. |
| 4 | Escalate disputed or unsupported items to contract and legal review. |
| 5 | Assess whether any unrecorded related-party transaction or commitment exists. |
| 6 | Refresh Ind AS 24 disclosures after the reconciliation rather than relying on the pre-close schedule. |
Evidence pack
- Both-party ledger extracts
- Direct confirmation response
- Contracts / loan agreements
- Post-year-end settlement evidence
- Updated related-party disclosure schedule
Worked example
A parent company confirms Rs 8.5 crore receivable from a subsidiary while the subsidiary shows Rs 7.9 crore payable. The Rs 60 lakh difference is not resolved by netting. Finance traces Rs 35 lakh to an invoice recorded only by the parent and Rs 25 lakh to interest calculated differently, then evaluates both the accounting correction and the disclosure impact.
Common mistakes
- Netting the difference without understanding individual items.
- Treating a related-party confirmation as fully independent evidence.
- Reconciling balances but forgetting commitments or transaction disclosures.
- Carrying unresolved differences as “timing” without subsequent evidence.
Frequently asked questions
Does a confirmation difference always require an adjustment?
No. Genuine timing differences can exist, but they must be evidenced and the recorded balances must be correct.
Why is related-party evidence higher risk?
Common control can reduce the independence of evidence and increases disclosure sensitivity.
What standard governs disclosure?
Ind AS 24 for entities applying Ind AS, alongside applicable Companies Act / reporting requirements.
Official sources
- Ministry of Corporate Affairs - Indian Accounting Standard (Ind AS) 24 - Related Party Disclosures (Ind AS 24; current)
- Institute of Chartered Accountants of India - SA 505 - External Confirmations (SA 505; current)
- Institute of Chartered Accountants of India - SA 500 - Audit Evidence (SA 500; current)
Disclaimer
Educational and professional reference only; confirm the current law, rates and the facts of your case before relying on this page.