Becker AUD 2.5: Letters for Underwriters Flashcards Preview

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Flashcards in Becker AUD 2.5: Letters for Underwriters Deck (23):

Another word for Letter for underwriters

Comfort letters


When letters for underwriters (comfort letters) are issued to provide positive assurance?

It is issued when providing POSITIVE assurance to underwriter concerning COMPLIANCE as to the "FORM" (appearance) of the AUDITED FS and FS schedules included in the registration statement within the meaning of requirements of the Securities Act of 1933.


When letters for underwriters (comfort letters) are issued to provide negative assurance?

Provide NEGATIVE assurance to underwriter concerning entity's UNAUDITED FS, Unaudited Condensed interim FS, Unaudited interim FS in conforming with GAAP.


Comments in comfort letters aka letters for underwriters are limited to what?

financial information


Are negative assurance provided in Compilation engagements (aka create unaudited FS (no assurance engagement))?


Compilation procedures do NOT result in negative assurance.


Comfort letter is a letter from the independent auditor to the named underwriter

just before or just after Registering client's securities on the stock exchange?

Just before registering the client's securities.


True or false.

Comfort letters are addressed to client company's audit committees signed by senior management.

Comfort letters are addressed to client's Underwriters of securities signed by Independent auditor.


Comfort letter generally covers the period from date of ____ to the effective date of ___.

It does not provide assurance on __ ___ FS, nor would it indicate a disclaimer on ___ FS.

Date of LAST AUDITOR'S REPORT to effective date of REGISTRATION.

On "pro forma" FS.

Disclaimer on "PROSPECTIVE" FS.


Can positive assurance be given when information is not audited?

No. Positive assurance is given when you have AUDITED FS.


Who signs the comfort letter:

Senior management
Underwriter of securities
Audit committee
Independent auditor/accountant?

Independent auditor/accountant

signs the comfort letter to be sent and addressed to Underwriter of Securities.


True or False.

Government Auditing Standards and Single Audit Act is not applicable to comfort letter(s) related to issuing securities.


This because issuing securities deals with actual public-held companies (not Government entities).


True or false.

Comfort letter (letters for underwriters) provides assurance on entity's internal controls operations.


Comfort letters do NOT provide assurance on entity's internal controls operations.


In a typical comfort letter, the accountants' express an opinion concerning audited FS (via positive assurance) on its conforming with what kind of requirements?

Accounting requirements of SEC.


True or false.

Comfort letters are addressed to the underwriter and are included in registration statement accompanying the prospectus.


Comfort letters do INDEED addressed to underwriter BUT ARE NOT included in registration statement accompanying the prospectus.


Are comfort letters required by Securities Act of 1933?

Are copies of comfort letters filed or not filed with the SEC?

No. Comfort letters are not required by Securities Act of 1933.

No. Copies of comfort letters are not filed with SEC.


Comfort letters' comments concerning unaudited interim FS provide what kind of assurance as to whether any material modifications should be made to the Unaudited interim FS in order to conform with GAAP?

Negative assurance.

FYI - Comfort letters + negative assurance + on unaudited FS, unaudited interim FS, and unaudited condensed interim FS.

FYI - Comfort letters on Positive assurance + Audited FS + express opinion on its compliance with SEC's accounting requirements as to FORM in compliance with requirements of SEC Act 1933.


When a comfort is to be issued by the Independent auditor to the underwriter, the CPA/independent auditor is required to do what to the Interim Fin info in accordance with auditing standards?

Review the interim FS.


If a requesting party that is not an underwriter requests a comfort letter, what does the requesting party do to get a comfort letter?

Provide an attorney's opinion or attorney rep. letter to the auditor, informing the auditor that the requesting party has due diligence defense.


What does the auditor do if the requesting party that wants a comfort letter, but does not provide an attorney opinion or rep letter?

The Auditor provides the comfort letter and this comfort letter should NOT state that it provides NEGATIVE ASSURANCE on FS as a whole or any specified elements, accounts or items thereof on the FS.


True or false.

Positive assurance on comfort letter indicates that the CPA is independent when dealing with audited FS.


Positive assurance is provided with respect to CPA's independence.


True or false.

Negative assurance is provided to the following:

Unaudited FS,
Unaudited condensed interim FS,
Capsule Financial information
that are reviewed by independent auditor.



Yes or no

Negative assurance is provided with respect to:

a) Unaudited FS, unaudited condensed interim FS, and capsule financial info (that are reviewed)
b) Changes in selected financial statement items during a period subsequent (after) to the date of Latest FS included in registration statement (that is audited or reviewed)
c) whether Financial information is included in the Registration statement COMPLIES as to FORM in all material respects with Regulation S-K.

a) Yes
b) Yes
c) No. This because it's focused on NON-FINANCIAL statement info included in Registration Statement complies (follows) as to FORM (appearance) in all material respects with regulation S-K.


True or false.

The auditor should NOT comment OR provide assurance on only market risk sensitive instruments.


The auditor does not comment OR not provide assurance on:

Market risk sensitive instruments
and Qualitative disclosures (no-number-based disclosures)