Definition of comfort letter

term used when underwriters request "comfort" from an auditor about financial information in SEC registration statements not covered by the auditor's opinion and on subsequent events after the opinion date. Comfort letters are not filed with the SEC but are required by underwriters who have certain responsibilities under SEC regulations. Typically, comfort letters are mandated as part of the underwriting agreement. The adequacy of procedures conducted in the comfort review rests with the underwriter and not the auditor. Underwriting agreements typically provide for a closing date on which the agreement is to be consummated and a "cutoff date" shortly before the closing date. The comfort letter should specifically state that it does not cover the period between the cutoff date and the date of the letter. The contents of the comfort letter cover some or all of the following: compliance with SEC rules and regulations, audit procedures conducted, unaudited financial statements and schedules, statistics and tables, changes in certain financial statement items after the latest statement contained in the filing, auditor independence, and an understanding regarding the limited circulation of the letter. Note that comments on unaudited statements and subsequent changes should be restricted to negative assurance since the auditor has not conducted an examination in accordance with Generally Accepted Accounting Principles (GAAP). Any financial statement, schedule, or other information referenced in the letter should be clearly identified along with the auditor's responsibility regarding it. The auditor should not comment on matters involving management judgment (i.e., reasons for change in income statement items). Working papers should back up statements made in comfort letters and furnish evidence of procedures carried out.

1. in underwriting , a letter from an independent auditor reporting the procedures followed in reviewing unaudited financial statements and other data in preparing the registration statement and prospectus. Sometimes called cold comfort letter.
2. letter indicating that a bank holding company will honor its end-of-day net settlement position in an electronic payment system. Comfort letters are commonly used in the Clearing House Interbank Payments System network in New York to reduce the possibility that a CHIPS member will fail to meet its payment obligations to other banks.

1. independent auditor's letter, required in securities underwriting agreements, to assure that information in the registration statement and prospectus is correctly prepared and that no material changes have occurred since its preparation.
2. letter from one to another of the parties to a legal agreement stating that certain actions not clearly covered in the agreement will- or will not-be taken.

1. independent auditor's letter, required in securities underwriting agreements, to assure that information in the registration statement and prospectus is correctly prepared and that no material changes have occurred since its preparation. It is sometimes called cold comfort letter-cold because the accountants do not state positively that the information is correct, only that nothing has come to their attention to indicate it is not correct.
2. letter from one to another of the parties to a legal agreement stating that certain actions not clearly covered in the agreement will- or will not-be taken. Such declarations of intent usually deal with matters that are of importance only to the two parties and do not concern other signers of the agreement.