Beware of Comfort Letters

Source: Pennsylvania CPA Journal

CPAs are reluctant to issue comfort letters. If you do issue a comfort letter, it can include verification of facts such as the borrower’s income, but CPAs should generally not render opinions on creditworthiness. Solvency statements are generally prohibited by professional standards and should be referenced only in the context of attestation engagements.

Sometimes discussion of the extent and cost of work necessary will induce a lender to reduce the scope of the required comfort letter to confirmation that the borrower’s income is consistent with what was reported to the IRS.

Even where limited to confirmation of facts such as the above, the CPA should refer to the source of the data, include a disclaimer with respect to auditing, make a statement that data is provided by the CPA pursuant to a request from its client, and indicate there is no relationship with the lender.

For the complete article, click here and select “Comfort Letters Offer No Comfort to CPAs" in the Spring 2008 issue.

From Pennsylvania CPA Journal, Spring 2008.

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