Is a comfort letter legally binding?

Is a comfort letter legally binding?

Comfort letters are generally issued by a parent or holding company giving ‘comfort’ to a lender about their support for a subsidiary in the context of a finance transaction. Comfort letters do not create rights over assets and, in most cases, they will not even be legally binding.

How do you write a comfort letter?

A comfort letter should be structured in a way that no unplanned legal formalities and unnecessary risks are added, and that all the statements made by the bank or organization should be valid and bear relevant facts and opinions.

What is the SAS 114 letter?

The Auditor’s Communication with Those Charged with Governance
What This Document Actually Is. The correspondence you’re reviewing is formally called a “SAS 114 Letter: The Auditor’s Communication with Those Charged with Governance.” However, it’s usually titled something much more “user-friendly.” Yours may be called: “Report to the Board” or “Report to the Trustees.”

Who can issue comfort letter?

The comfort letter can be issued by a Certified Public Accountant declaring no indication of false or misleading information in the financial statements and that the company’s prospectus follows the prevailing accounting standards. This is sometimes used in connection with an initial public offering.

What is a circle up in a comfort letter?

This auditor’s comfort letter confirms to the underwriters that the auditor is independent, that financial information has been properly extracted from audited/reviewed financial statements or accounting records (accompanied by the auditor circle-up of the offering documents) and there has been no adverse change in …

Do comfort letters provide positive assurance?

A comfort letter is a letter delivered by an issuer’s independent accountants to the underwriters or initial purchasers that provides certain assurances with respect to financial information included in a registration statement, prospectus, or offering memorandum used for a securities offering.

What is a SAS 100 review?

SAS 100 contains more detailed and extensive guidance than that found in SAS 71. SAS 100 is effective for reviews of interim financial information for fiscal years beginning after December 15, 2002. The provisions in SAS 100 could have been utilized in advance of the required effective date.

What is SAS 72 comfort letter?

Comfort letters are an important part of the underwriters’ due diligence review and defence from potential liability under US securities law. Comfort letters are often referred to as SAS 72 letters, which relates to the Statement on Auditing Standards 72 (SAS 72) on which they are based.

What superseded SAS 99?

SAS 99, which supersedes SAS 82, was issued partly in response to contemporary accounting scandals at Enron, WorldCom, Adelphia, and Tyco. The standard incorporates recommendations from various contributors including the International Auditing & Assurance Standards Board.

What is SAS 99 now?

SAS no. 99 describes a process in which the auditor (1) gathers information needed to identify risks of material misstatement due to fraud, (2) assesses these risks after taking into account an evaluation of the entity’s programs and controls and (3) responds to the results.

What are SAS 100 procedures?

SAS 100 provides guidance which is primarily in response to the requirement. The requirement is also applicable to a non-SEC registrant that makes a filing with a regulatory agency in preparation for a public offering or listing if the entity’s latest annual financial statements have been or are being audited.

What is a SAS 100?

SAS 100 means Statement of Auditing Standards 100: Objective and General Principles Governing an Audit of Financial Statements.

What does SAS 72/au 634 mean?

Statement on Auditing Standards No. 72 “Letters for Underwriters and Certain Other Requesting Parties” (SAS 72/AU 634) provides guidance to accountants for performing and reporting on the results of engagements to issue comfort letters to underwriters.

Can an accountant give SAS 100 negative assurance on financial information?

An accountant cannot give SAS 100 negative assurance on financial information for a company’s full fiscal year because SAS 100 only applies to interim financial information as that term is defined in AU 722.02.

What is a comfort letter in auditing?

The comfort letter will affirm that the audited financial statements comply as to form in all material respects with the applicable accounting requirements of the Securities Act, and the related rules and regulations of the SEC thereunder.

Who is involved in issuing a comfort letter?

There are three key parties involved with a comfort letter to be issued in connection with an underwritten registered offering: the issuer, the underwriter and the accountant. The issuer is responsible for preparing the registration statement and determining its contents.