Comfort Letter - Citizendia

A Comfort Letter is a document prepared by an accounting firm assuring the financial soundness or backing of a company. Accountancy or accounting is the measurement statement or provision of assurance about financial information primarily used by Lenders managers, ^[1] 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. Certified Public Accountant ( CPA) is the Statutory title of qualified Accountants in the United States who have passed the Uniform A prospectus is a legal document that institutions and businesses use to describe the Securities they are offering for participants and buyers Generally Accepted Accounting Principles (GAAP is the standard framework of guidelines for Financial accounting. This is sometimes used in connection with an initial public offering. Initial public offering (IPO, also referred to simply as a "public offering" is when a company issues Common stock or shares to the public for the first ^[2]

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. A subsidiary, in business matters is an entity that is controlled by a bigger and more powerful entity 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. A security is a Fungible, Negotiable instrument representing financial value ^[3]

References

^ Random House (2005). Random House Inc is the world's largest English-language general trade book publisher Random House Webster's Unabridged Dictionary. Random House Reference. ISBN 0375426051.
^ Scott, David L. (1998). Wall Street Words. Houghton Mifflin. ISBN 0395437474.
^ Practical Law Company Comfort Letter Retrieved on July 27, 2007

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