The American Institute of CPAs’ Auditing Standards Board has amended its standards for providing so-called “comfort letters” to underwriters and other parties requesting such letters.
The ASB has issued Statement on Auditing Standards No. 129, “Amendment to SAS No. 122 Section 920, Letters for Underwriters and Certain Other Requesting Parties, as Amended,” to address implementation issues and avoid unintended changes to previous practice. Section 920 addresses the auditor’s responsibilities when engaged to issue CPA comfort letters to requesting parties in connection with a nonissuer’s financial statements that are included in a registration statement or other securities offerings.
The amendment modifies the requirement to inform the requesting party that the auditor cannot provide any assurance regarding the sufficiency of the procedures for the requesting party’s purposes by changing “state in any discussion” to “communicate” so as to provide the auditor with more flexibility in making this required communication.
It also clarifies that the requirement for the auditor to read the comfort letter issued by component auditors whose report is included in the securities offering applies to each component auditor, not only those comfort letters related to significant components.
In addition, the changes amend the requirement to attach the review report when the auditor states in the comfort letter that the auditor has performed a review of unaudited interim financial information to a requirement to attach the review report when the auditor states in the comfort letter that the auditor has issued a review report on unaudited interim financial information.
The new standard also amends application material to indicate that attaching the review report on unaudited interim financial information is required when the auditor states in the comfort letter that the auditor has issued a review report on unaudited interim financial information.
The SAS becomes effective for comfort letters issued on or after Dec. 15, 2014 (although early implementation is encouraged), and contains additional amendments to further clarify AU-C section 920.
To read a summary of all the changes, click here.