Page 619 - Auditing Standards

As of December 15, 2017
that the accountants will become aware of any or all significant matters that would be disclosed in an audit.

Accordingly, there is necessarily a risk that the accountants may have provided negative assurance of the
absence of conditions or matters that may prove to have existed.

.13 This section deals with several different kinds of matters. First, it addresses whether, in a number of

areas involving professional standards, it is proper for independent accountants, acting in their professional
capacity, to comment in a comfort letter on specified matters, and, if so, the form such a comment should
take. Second, practical suggestions are offered on which form of comfort letter is suitable in a given

circumstance, procedural matters, the dating of letters, and what steps may be taken when information that
may require special mention in a letter comes to the accountants' attention. 11 Third, it suggests ways of
reducing or avoiding the uncertainties, described in the preceding paragraph, regarding the nature and extent
of accountants' responsibilities in connection with a comfort letter. Accountants who have been requested to

follow a course other than what has been recommended, with regard to points not involving professional
standards, would do well to consult their legal counsel.

.14 Comfort letters are not required under the Act, and copies are not filed with the SEC. It is nonetheless
a common condition of an underwriting agreement in connection with the offering for sale of securities
registered with the SEC under the Act that the accountants are to furnish a comfort letter. Some underwriters

do not make the receipt of a comfort letter a condition of the underwriting agreement or purchase agreement
(hereafter referred to as the underwriting agreement) but nevertheless ask for such a letter. 12

.15 The accountants should suggest to the underwriter that they meet together with the client to discuss
the procedures to be followed in connection with a comfort letter; during this meeting, the accountants may
describe procedures that are frequently followed (see the examples in the appendix [paragraph .64]).
Because of the accountants' knowledge of the client, such a meeting may substantially assist the underwriter

in reaching a decision about procedures to be followed by the accountants. However, any discussion of
procedures should be accompanied by a clear statement that the accountants cannot furnish any assurance
regarding the sufficiency of the procedures for the underwriter's purposes, and the appropriate way of

expressing this is shown in paragraph 4 of example A [paragraph .64].

.16 Because the underwriter will expect the accountants to furnish a comfort letter of a scope to be
specified in the underwriting agreement, a draft of that agreement should be furnished to the accountants so

that they can indicate whether they will be able to furnish a letter in acceptable form. It is desirable practice for
the accountants, promptly after they have received the draft of the agreement (or have been informed that a

letter covering specified matters, although not a condition of the agreement, will nonetheless be requested), to
prepare a draft of the form of the letter they expect to furnish. To the extent possible, the draft should deal
with all matters to be covered in the final letter and should use exactly the same terms as those to be used in
the final letter (subject, of course, to the understanding that the comments in the final letter cannot be

determined until the procedures underlying it have been performed). The draft letter should be identified as a

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