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How CPAs Can Respond to Comfort Letter Pressures


Many CPAs have shared their frustrations regarding veiled threats from aggressive brokers and lenders, alleging that the CPAs’ clients will not qualify for a loan without receiving a letter supporting the clients’ loan qualifications. Some brokers even suggest that the client should seek a “more cooperative” CPA.

Apr 21st 2021
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CPAs have to handle pressures from a variety of sources, those that come from banks and other lenders wanting reasonable assurance of a client’s financial strength are unfortunately quite common. As tempting as it may be to comply with such requests, CPAs who provide the requested assurances could actually put their license at risk.

First, CPAs could fall short of professional expectations if they don’t adhere to AICPA Professional Standards. Interpretation No. 1, Responding to Requests for Reports on Matters Relating to Solvency, of AT-C Section 105, Concepts Common to All Attestation Engagements: Attestation Interpretations of Section 105, prohibits CPAs from providing any level of assurance that an entity is, or will continue to be, solvent.

Another risk is that lenders may allege that the CPA misrepresented the client’s creditworthiness should that client later default on the loan. In some situations, lenders have alleged that CPAs misrepresented self-employment status, financial condition, or creditworthiness.

The creditworthiness dilemma is a balancing act, and CPAs need to carefully evaluate the risks associated with complying with these requests. For example, since professional standards do not require CPAs to provide any letters to third parties, they need to balance the risk of saying “no” (and potentially losing the client or being sued should the loan fall through) against the risks of saying “yes” (and not meeting the profession’s standard of care or becoming a “deep pocket” target if the client defaults).

The following examples provide some ideas on how to traverse the delicate balance of mitigating risks while managing client and third-party expectations:

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