What is included in a comfort letter?

What is included in a comfort letter?

When the report on the audited financial statements and financial statement schedules in the registration statement departs from the auditor’s standard report, and the comfort letter includes negative assurance with respect to subsequent unaudited condensed interim financial information included (incorporated by …

Can a CPA write a comfort letter?

CPAs are regularly asked to provide a loan broker, lender or other third party with a comfort letter or verification letter on behalf of their clients.

What is SAS 72 comfort letter?

A standard form SAS 72 (or auditor representation) letter delivered to the issuer’s auditors in an unregistered securities offering to allow the auditors to prepare and deliver a comfort letter.

What is a comfort letter in an audit?

A comfort letter is a business document that is intended to assure the recipient that a financial or contractual obligation with another party can and will be met. The sender is often an independent auditor or accountant. A comfort letter is also known as a letter of intent or, in some cases, a solvency opinion.

What is the 135 day rule?

Mind the 135-day Rule and the Dates for Delivery of the Comfort Letter. Accountants may provide negative assurance as to subsequent changes in specified financial statement items as of a date less than 135 days from the end of the most recent period for which the accountants have performed an audit or a review.

How do you write a comfort letter?

How to write a condolence letter

1. Write the letter by hand.
2. Keep it short and simple.
3. Express your condolences.
4. Share a memory.
5. Offer your help and support.
6. Close the letter with some thoughtful words.

Is letter of comfort a guarantee?

Letters of comfort (also known as letters of support or letters of responsibility) are letters of moral commitments given to support certain obligations. Unlike guarantees, these are merely commitments are not legally binding.

Do comfort letters provide positive assurance?

This positive assurance or formal opinion is the highest level of comfort possible. Instead, the comfort letter will contain an acknowledgment that the accountants have audited the issuer’s annual financial statements included in the offering document and have issued an opinion.

What is a circle up in a comfort letter?

That is to say (i) it is considered to be audited information (so that sponsors are not normally required to carry out any further due diligence) and (ii) this is evidenced and recorded in a section of the primary auditor “comfort letter” commonly known as “circle-up” (which refers to the copy pages annexed showing the …

Are comfort letters legally binding?

It is not usually intended to be legally binding but it may give rise to a legally binding obligation depending on the wording. Therefore, care is needed when drafting a comfort letter.

What is a bring down comfort letter?

Comfort letters are typically signed prior to the pricing decision or closing date for a given public offering or other transaction, as a part of the due diligence process. Subsequently, a “bring-down” letter is used to re-verify, as of a later date, that the original comfort letter is still valid.

Is a comfort letter legally binding?

Where does the 135 day rule come from?

The “135-day Rule” What Tom is struggling with is commonly known as the “135-day Rule.” The 135-day Rule comes from SAS 72/AU 634 (see paragraphs.46 and.47). Under SAS 72, auditors will generally provide full comfort (including negative assurance) on financial statements that are less than 135 days old.

When is the cutoff date for a comfort letter?

In practice, the cutoff date is often the second or third business day prior to the date of the comfort letter, as the underwriters prefer to have a shorter “dark period.” SAS 72, Paragraph .23.

When to give negative assurance on a comfort letter?

If 135 days or more have passed between the date of the most recent financial statements that have been audited or reviewed, on the one hand, and the cutoff date of the comfort letter, on the other hand, the auditors cannot give negative assurance on the change period.

Who is eligible to receive a comfort letter?

For example, the initial purchaser in a Rule 144A offering or the lead dealer for a Section 3(a)(2) bank note offering, will request and receive comfort letters. A sample comfort letter delivered to a non‐underwriter can be found at Example P of SAS 72.