Business accountants are frequently requested by clients to provide lenders or other third parties with a comfort letter or verification letter.
Requests for these letters of comfort are becoming more frequent, such as from health insurance companies, for BEE verification purposes, as well as from banks and other service providers.
Accountants need to be aware that by signing a letter of comfort you may be unintentionally violating professional standards. It is important that you know what you’re being asked to certify, what the risks are and other options you may have. Check that what you are signing fits within your professional code of ethics.
To guide you in the right direction, here are some resources, templates and articles provided by the American Institute of Certified Public Accountants (AICPA) on the subject.
- Financial Reporting Center’s resources including a Technical Practice Aid relating to lender comfort letters.
- Matrix outlining common requests CPAs have been receiving regarding verifications and related responses that may be appropriate, depending on whether or not the CPA has performed additional procedures to corroborate the information.
- The AICPA has developed a position paper on third-party verifications. Some lenders make requests for the CPA to provide information regarding their clients that the CPA cannot provide (e.g. solvency request). The AICPA has issued a position paper on third party verifications, outlining the requests to which CPAs can respond. The paper can help CPAs explain to requesters why a request for information might be declined.
- Article about third party verification letters, including a sample letter and alternatives provided by the AICPA Professional Liability Insurance Program.
- AICPA Insights blog on the dangers of providing certain types of letters
These resources will provide you some examples of the types of requests accountants are receiving. And as you look at what you’re being asked to certify, make sure it conforms with the relevant code of professional ethics.