Page 630 - Auditing Standards

As of December 15, 2017

.40 The underwriter occasionally asks the accountants to give negative assurance with respect to the

unaudited interim financial statements or unaudited condensed interim financial information (see paragraph
.37 and the interim financial information requirements of Regulation S-X) that underlie the capsule financial
information and asks the accountants to state that the capsule financial information agrees with amounts set

forth in such statements. Paragraphs 4b and 5b in example L [paragraph .64] provide an example of the
accountants' comments in these circumstances.

.41 The underwriter might ask the accountants to give negative assurance on the unaudited condensed

interim financial information, or information extracted therefrom, for a monthly period ending after the latest
financial statements included (incorporated by reference) in the registration statement. In those cases, the
guidance in paragraph .37 is applicable. The unaudited condensed interim financial information should be

attached to the comfort letter so that it is clear what financial information is being referred to; if the client
requests, the unaudited condensed interim financial information may be attached only to the copy of the letter
intended for the managing underwriter.

Pro Forma Financial Information

.42 Accountants should not comment in a comfort letter on pro forma financial information unless they
have an appropriate level of knowledge of the accounting and financial reporting practices of the entity (or, in

the case of a business combination, of a significant constituent part of the combined entity). This would
ordinarily have been obtained by the accountants auditing or reviewing historical financial statements of the

entity for the most recent annual or interim period for which the pro forma financial information is presented.
Accountants should not give negative assurance in a comfort letter on the application of pro forma
adjustments to historical amounts, the compilation of pro forma financial information, whether the pro forma
financial information complies as to form in all material respects with the applicable accounting requirements

of rule 11-02 of Regulation S-X or otherwise provide negative assurance with respect to pro forma financial
information unless they have obtained the required knowledge described above and they have performed an
audit of the annual financial statements, or an AS 4105 review of the interim financial statements, of the entity

(or, in the case of a business combination, of a significant constituent part of the combined entity) to which the
pro forma adjustments were applied. In the case of a business combination, the historical financial statements
of each constituent part of the combined entity on which the pro forma financial information is based should
be audited or reviewed.

.43 If the accountants have obtained the required knowledge as described in paragraph .36, but have not
met the requirements for giving negative assurance, the accountants are limited to reporting procedures

performed and findings obtained. (See example O [paragraph .64].) The accountants should comply with the
relevant guidance on reporting the results of agreed-upon procedures in AT section 201.

Financial Forecasts

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