Page 615 - Auditing Standards

As of December 15, 2017
request accountants to assist them in developing a record of reasonable investigation. An accountant issuing

a comfort letter is one of a number of procedures that may be used to establish that an underwriter has
conducted a reasonable investigation.

Applicability

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.03 Accountants may provide a comfort letter to underwriters, or to other parties with a statutory due
diligence defense under section 11 of the Act, in connection with financial statements and financial statement
schedules included (incorporated by reference) in registration statements filed with the SEC under the Act. A

comfort letter may be addressed to parties with a statutory due diligence defense under section 11 of the Act,
other than a named underwriter, only when a law firm or attorney for the requesting party issues a written
opinion to the accountants that states that such party has a due diligence defense under section 11 of the
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Act. An attorney's letter indicating that a party "may" be deemed to be an underwriter or has liability
substantially equivalent to that of an underwriter under the securities laws would not meet this requirement. If
the requesting party, in a securities offering registered pursuant to the Act, other than a named underwriter
(such as a selling shareholder or sales agent) cannot provide such a letter, he or she must provide the

representation letter described in paragraphs .06 and .07 for the accountants to provide them with a comfort
letter.

.04 Accountants may also issue a comfort letter to a broker-dealer or other financial intermediary, acting
as principal or agent in an offering or a placement of securities, in connection with the following types of
securities offerings:

Foreign offerings, including Regulation S, Eurodollar, and other offshore offerings

Transactions that are exempt from the registration requirements of section 5 of the Act, including

those pursuant to Regulation A, Regulation D, and Rule 144A

Offerings of securities issued or backed by governmental, municipal, banking, tax-exempt, or other
entities that are exempt from registration under the Act

In these situations the accountants may provide a comfort letter to a broker-dealer or other financial
intermediary in connection with a securities offering only if the broker-dealer or other financial intermediary
provides in writing the representations described in paragraphs .06 and .07.

.05 Accountants may also issue a comfort letter in connection with acquisition transactions (for example,
cross-comfort letters in a typical Form S-4 or merger proxy situation) in which there is an exchange of stock

and such comfort letters are requested by the buyer or seller, or both, as long as the representation letter
described in paragraphs .06 and .07 is provided. An accountants' report on a preliminary investigation in
connection with a proposed transaction (for example, a merger, an acquisition, or a financing) is not covered

by this section; accountants should refer to the guidance in AT section 201, Agreed-Upon Procedures

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