Comfort Letter

What is a 'Comfort Letter'

A comfort letter is a letter given to organizations or persons of interest by external auditors regarding statutory audits, statements and reports used in a prospectus. The comfort letter will be attached to the preliminary statements as assurance that it will not be materially different from the final version.

Also known as "letter of comfort" or "solvency opinion".

BREAKING DOWN 'Comfort Letter'

Comfort letters can be used by lenders, such as banks as solvency opinions on whether a borrower can meet the payment obligations of a loan. They are opinions and are not guarantees that the underlying company will actually remain solvent.

Comfort letters can also be used by underwriters as their obligation to carry out "reasonable investigation" into offerings of securities. These letters of comfort will ensure that the reports provided conform to the generally accepted accounting principals (GAAP). This helps the underwriter better understand aspects of the financial data which might not otherwise be reported such as changes to financial statements and unaudited financial reports.

RELATED TERMS
  1. Confirmed Letter Of Credit

    A second guarantee, in addition to a letter of credit, that commits ...
  2. Letter Of Comfort

    A letter issued to a lending institution by a parent company ...
  3. Accountant's Letter

    A letter that usually precedes a financial report. An accountant's ...
  4. Shareholder Letter

    A shareholder letter is a letter written by a firm's top executives ...
  5. Sight Letter Of Credit

    A letter of credit that is payable once it is presented along ...
  6. Attorney's Letter

    A letter sent by a CPA to the client's attorney. The attorney's ...
Related Articles
  1. Retirement

    Letter Of Instruction - Don't Leave Life Without It

    This simple document can take the guesswork and headache out of settling your estate.
  2. Personal Finance

    Financial Analyst Cover Letters That Get You Hired

    Crafting a strong cover letter for a job can increase your chances of standing out from the crowd and landing an interview. Some techniques that help.
  3. Professionals

    7 Cover Letter Blunders

    It's not just your resume that matters. Find out which cover letter mistakes can keep you from landing a job.
  4. Personal Finance

    The Complete Guide To Job Searching: Cover Letters

    You have found a job that sounds ideal. You might have the exact skills that the employer is looking for, but unless you can broadcast your abilities, the employer may never know you are the ...
  5. Investing

    Letter of Credit

    A letter of credit is a document from a bank promising to pay the holder a certain amount if the holder fulfills certain obligations. Sellers in commercial transactions often require buyers to ...
  6. Professionals

    7 Cover Letter Blunders

    It's not just your resume that matters. Find out which cover letter mistakes can keep you from landing a job.
  7. Professionals

    The Auditor and Audit Opinion

    CFA Level 1 - The Auditor and Audit Opinion. Learn about the role and responsibility of the auditor. This outlines what is occurs in an audit and the requirements for a qualified opinion.
  8. Professionals

    The Bottom Line

    It's not just your resume that matters. Find out which cover letter mistakes can keep you from landing a job.
  9. Professionals

    Incorrect Company Name

    It's not just your resume that matters. Find out which cover letter mistakes can keep you from landing a job.
  10. Professionals

    7 Cover Letter Blunders

    Your resume might be stellar, but if your cover letter is a mess, that resume is likely to go straight into the trash unread.
RELATED FAQS
  1. When is it necessary to get a letter of credit?

    Capitalize on assets and negate risks by using a letter of credit. Letters of credit are often requested for buying, selling ... Read Answer >>
  2. What are the different types of letters of credit?

    Learn more about the different types of letters of credit that are used to facilitate exchanges between parties that might ... Read Answer >>
  3. When do I need a letter of credit?

    Learn more about the function of a letter of credit for both the buyer and the seller, and get some examples showing when ... Read Answer >>
  4. Can entities other than banks issue letters of credit?

    Obtaining a letter of credit from a non-bank is legally acceptable according to the ICC, but companies tend to prefer to ... Read Answer >>
  5. When are you legally required to get a letter of credit?

    Learn how exporters or importers who deal in international trade use letters of credit to ensure that transactions are safe, ... Read Answer >>
  6. What content does a letter intent have to have?

    Review some of the standard language that ought to be included in a letter of intent between two parties in a business transaction. Read Answer >>
Hot Definitions
  1. Yield Curve

    A line that plots the interest rates, at a set point in time, of bonds having equal credit quality, but differing maturity ...
  2. Stop-Limit Order

    An order placed with a broker that combines the features of stop order with those of a limit order. A stop-limit order will ...
  3. Keynesian Economics

    An economic theory of total spending in the economy and its effects on output and inflation. Keynesian economics was developed ...
  4. Society for Worldwide Interbank Financial Telecommunications ...

    A member-owned cooperative that provides safe and secure financial transactions for its members. Established in 1973, the ...
  5. Generally Accepted Accounting Principles - GAAP

    The common set of accounting principles, standards and procedures that companies use to compile their financial statements. ...
  6. DuPont Analysis

    A method of performance measurement that was started by the DuPont Corporation in the 1920s. With this method, assets are ...
Trading Center