Question

What is a comfort letter? What is its purpose?

i need the resource. the course is auditig

Answer 1

Solution :

The comfort letters are generally the letters for the underwriters and other requesting parties. Independent auditors in conjunction with the audit, they may issue comfort letters for underwriters and other parties. They are not required by law and not filed with the SECbut underwriting agreements often request them. Accountants are limited in the commnents they can make in comfort letters on unaudited financial information.

Accountants may issue comfort letters for other parties namely a party with due diligence defense.When a party with a due diligence defense requests a comfort leter but does nto furnish a representation letter , the accountant may not provide a negative assurance but may describe procedures performed.

Format and content of Comfort letters :

1. Date : it is dated shortly before the effective date of the registration statement.

2. Addressee : Must be addressed to the client only.

3. Independence : The accountnats make a statement concerning their independence in the letter

4. Compliance with SEC requirements : It should express an opinion on the audited financial statements in the registration statement comply as to form in all material respects with the requirements of the act.

5. Accountants report : Underwriters may request the accountants to repeat in the comfort letter their opinion on the audited financial statements included in the registration statement.