comfort-letter-from-auditors

# Comfort Letter from Auditors

Drafts a comfort letter under PCAOB AS 6101 providing negative assurance on unaudited interim financials and pro forma data for underwriter reliance in U.S. securities offerings.

## Required Inputs

1. **Offering details** — type (IPO, secondary), SEC file number, form type (S-1, S-3), pricing/closing date
2. **Audited financial statements** — fiscal periods covered, audit report date
3. **Unaudited interim financials** — periods under review; pro forma data if applicable
4. **Underwriting agreement** — date, full legal names of all addressees, specific comfort items requested
5. **Cut-off date** — within 5 business days of comfort letter date
6. **Engagement authorization** — engagement letter authorizing preparation

## Drafting Workflow

### 1. Header & Introduction

- Firm letterhead with PCAOB registration number
- Date coinciding with pricing or closing
- Addressees: all underwriters/placement agents by full legal name
- State purpose, registration statement number, audited periods, governing standard (PCAOB AS 6101), and underwriting agreement authorization

### 2. Scope & Procedures

Include required disclaimer: procedures do **not** constitute an audit or review under PCAOB standards and are **substantially less in scope** than an examination.

Standard procedures:
- Read minutes of stockholders, board, and committee meetings through cut-off date
- Inquire of officials re: changes in capital stock, long-term debt, specified financial statement items
- Apply analytical procedures to interim data (comparison to prior periods)
- Agree interim figures to accounting records
- Read unaudited interim financials in the registration statement
- If applicable: agreed-upon procedures on pro forma information

State cut-off period: from latest audited balance sheet date through cut-off date.

### 3. Negative Assurance Statements

Use consistently for each item requested in the underwriting agreement:

> "Nothing came to our attention as a result of the foregoing procedures that caused us to believe that..."

| Topic | Completing clause |
|---|---|
| Financial statement items | ...material decreases in [item] vs. [audited period] |
| Long-term debt | ...increase beyond [threshold / any material amount] |
| Stockholders' equity | ...material decrease from [date] to cut-off date |
| Interim financials | ...not prepared in conformity with GAAP on a basis consistent with audited statements |
| Pro forma (if applicable) | ...adjustments not applied consistently with applicable SEC rules / GAAP [VERIFY: Reg S-X Rule 11-02] |

### 4. Limitations & Disclaimers

- Solely for named addressees' use in their investigation
- No third-party reliance without prior written consent
- No opinion on sufficiency of procedures for underwriters' purposes
- No responsibility for registration statement / prospectus disclosure adequacy
- No assurance on legal matters or regulatory compliance beyond financial presentation
- No obligation to update beyond cut-off date

### 5. Closing & Signature

- Reaffirm limited assurance and reliance restrictions
- Restrict inclusion in transaction documents and further distribution
- Signature: firm name, authorized partner signature, "Certified Public Accountants," signing office location
- If required: confirm PCAOB registration and independence compliance

## Critical Rules

- **Negative assurance only** — "nothing came to our attention" is the ceiling; never imply positive assurance
- **PCAOB AS 6101** — all procedures and formulations must conform; cite in introduction [VERIFY current designation]
- **Addressee specificity** — letter is non-transferable; name all relying parties; comfort does not extend to unnamed parties
- **Cut-off discipline** — do not extend assurance beyond the stated cut-off date
- **Independence** — confirm PCAOB and SEC independence requirements before issuance
- **Pro forma** — address separately under applicable Regulation S-X rules if included in registration statement [VERIFY]
- **Securities Act context** — underwriters rely on comfort letters for Section 11 due diligence defense
- **Senior review required** — flag for engagement partner review; do not finalize without attorney sign-off on limitations language