casemark/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