Comfort Letter

Comfort Letter

A Comfort Letter is a document prepared by an accounting firm assuring the financial soundness or backing of a company. [cite book | last =Random House | title = Random House Webster's Unabridged Dictionary | publisher = Random House Reference | date = 2005 | isbn = 0375426051] The comfort letter can be issued by a CPA declaring no indication of false or misleading information in the financial statements and that the company's prospectus follows GAAP. This is sometimes used in connection with an initial public offering. [cite book | last =Scott | first =David L. | title =Wall Street Words | publisher =Houghton Mifflin | date =1998 | isbn =0395437474 ]

A comfort letter may also be used as written assurance by a subsidiary's parent company or bank used to offer 'comfort' to the buyer as to the seller's ability or willingness to perform its obligations. Comfort letters are often used because the seller is unable or unwilling to provide a guarantee on a certain outcome, such as the performance of a security. [Practical Law Company [ Comfort Letter] Retrieved on July 27, 2007]


ee also

*Financial audit

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