What it is
A contractor’s bonding program decides how much work it can win, and its terms can affect going concern, disclosures and the evaluation of contingent liabilities. The surety holds the best evidence of the bonds issued, the limits, the indemnity and collateral arrangements and any claims. This letter asks the surety to report those items directly to the auditor.
It follows the structure of a standard external confirmation: a request on the client’s letterhead, blank response fields the surety completes from its own records, a surety response block and an auditor control log. Items that should not be pre-filled are left blank for the surety.
When to use it
- On any audit of a contractor that has bonded work in progress or a bonding program in place.
- When the work-in-process schedule shows jobs with fading margins or losses that could draw a claim.
- When the loan agreement or a covenant refers to bonding capacity and the auditor needs independent evidence of it.
What’s inside
- Request letter with a direct-reply instruction to the auditor
- Table of bonds outstanding with penal sum and estimated exposure
- Program limits, indemnity agreement, collateral and funds control
- Premiums, fees and amounts owed, and a claims and default section
- Surety response block and auditor confirmation control log
Standard cited
This template follows AU-C 505. It is written in our own words, except for phrases the standard requires the document to contain, with [bracketed placeholders] for client details, amounts in USD and dates as MM/DD/YYYY. Check it against the current standard and your firm’s methodology before use. See AU-C 505 explained.
Questions
Why confirm with the surety when the contractor has its own bond records?
Because the surety’s records are independent of the entity. The surety can report claims, reservations of rights, collateral demands and limits that management may not have recorded or disclosed, which are the items that matter for contingencies and going concern.
Who should sign the request?
An authorized officer of the client signs it, and the surety replies directly to the audit firm. The auditor controls the request: selects the surety, verifies the address from an independent source, sends it and receives the reply.
What if the surety does not reply?
Send a second request and, if there is still no reply, perform alternative procedures: inspect the bonds and indemnity agreement, read the surety’s correspondence with the contractor, and evaluate the effect of the non-response on the audit. Record the steps in the control log.
Related templates
- Audit Program: Construction Contractor
- Construction Retainage and Surety Bonding Schedule
- Bank Confirmation Letter (AU-C 505)
- Confirmation Control Log (AU-C 505)
Last updated 11/05/2026. All free templates.