Page 628 - Auditing Standards

As of December 15, 2017
paragraph 4 of example A [paragraph .64].

e. Matters to be covered by the letter should be made clear in the meetings with the underwriter and
should be identified in the underwriting agreement and in the draft comfort letter. Since there is no
way of anticipating other matters that would be of interest to an underwriter, accountants should not

make a general statement in a comfort letter that, as a result of carrying out the specified
procedures, nothing else has come to their attention that would be of interest to the underwriter.

f. When the report on the audited financial statements and financial statement schedules in the

registration statement departs from the auditor's unqualified report, and the comfort letter includes
negative assurance with respect to subsequent unaudited condensed interim financial information
included (incorporated by reference) in the registration statement or with respect to an absence of
specified subsequent changes, increases, or decreases, the accountant should consider the effect

thereon of the subject matter of the qualification, explanatory paragraph(s), or paragraph(s)
emphasizing a matter regarding the financial statements. The accountant should also follow the
guidance in paragraph .27. An illustration of how this type of situation may be dealt with is shown in

example I [paragraph .64].

Knowledge of Internal Control

.36 The accountants should not comment in a comfort letter on (a) unaudited condensed interim financial
information, (b) capsule financial information, (c) a financial forecast when historical financial statements
provide a basis for one or more significant assumptions for the forecast, or (d) changes in capital stock,
increases in long-term debt and decreases in selected financial statement items, unless they have obtained

knowledge of a client's internal control as it relates to the preparation of both annual and interim financial
information. Knowledge of the client's internal control over financial reporting includes knowledge of the
control environment, risk assessment, control activities, information and communication, and monitoring.

Sufficient knowledge of a client's internal control as it relates to the preparation of annual financial information
ordinarily would have been acquired, and may have been acquired with respect to interim financial
information, by the accountants who have audited a client's financial statements for one or more periods.

When the accountants have not audited the most recent annual financial statements, and thus have not
acquired sufficient knowledge of the entity's internal control, the accountants should perform procedures to
obtain that knowledge.

Unaudited Condensed Interim Financial Information

.37 Comments concerning the unaudited condensed interim financial information 28 included
(incorporated by reference) in the registration statement provide negative assurance as to whether (a) any

material modifications should be made to the unaudited condensed interim financial information for it to be in
conformity with generally accepted accounting principles and (b) the unaudited condensed interim financial
information complies as to form in all material respects with the applicable accounting requirements of the Act

and the related rules and regulations adopted by the SEC. Accountants may comment in the form of negative

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