Circularization

it is the confirmation of receivable balances to the clients customer(receivables circularisation). Payables circularisation is exactly the same except that the confirmation is sent the supplier. A letter is written asking the client or supplier to confirm the balance.However enclosed in the envelop is another envelop addressed directly to the auditors address.The format can be in two different ways . 1.Positive circularisation where everyone has to reply to the confirmation letter whether they agree with the balance or not.2 Negative circularisation where recipients are only required to reply if they disagree with the balance.

This is well explained in Mr Garret`s lecture notes (open tuition).