Application and Other Explanatory Material

Includes: Scope of this Standard on Related Services, Types of Offerings Covered by this ASRS, Engagement Acceptance, Performing the Engagement , Commenting in a Comfort Letter on Financial Information Other than Audited or Reviewed Financial Statements, Entity Written Representations, Subsequently Discovered Matters, Format and Contents of the Comfort Letter, Preparing a Bring Down Comfort Letter , Example Engagement Letter, Example Entity Representation Letter, Example Comfort Letter, Example Bring Down Comfort Letter

Scope of this Standard on Related Services

(Ref: Para. 3)

Types of Offerings Covered by this ASRS

(Ref: Para. 6)

Engagement Acceptance

Preconditions for Providing a Comfort Letter


The signed representations may be provided by way of a specific letter or agreed to be included by the auditor in the engagement letter terms which are then co-signed by the requesting parties with the responsible party of the entity. (Ref: Para. 14(e)(v))

Agreeing on the Terms of Engagement


Acknowledgement by the responsible party of the entity and the requesting parties in writing of their acceptance of the engagement letter provides evidence that the entity and the requesting parties accept their engagement responsibilities and establishes a basis of common understanding of the responsibility of each party. It also avoids misunderstandings of the agreed terms. If the requesting parties do not agree to sign, or do not sign the engagement letter, the auditor may: (Ref. Para: 17)

  1. be satisfied that the requesting parties' responsibilities in the engagement are already contained in applicable law or regulation thereby not requiring the requesting parties' written acknowledgement as a signatory to the engagement letter;
  2. if the requesting parties' responsibilities are not already contained in applicable law or regulation, not agree to issue the comfort letter; or
  3. agree to report only factual findings on the financial information in accordance with ASRS 4400 Agreed-Upon Procedures Engagements to Report Factual Findings.

Draft Comfort Letter


The following is an example of a paragraph that may be placed in the draft letter for identification and explanation of its purposes and limitations: (Ref: Para. 19)

“This draft is provided solely for the purpose of indicating the form of letter that we would expect to be able to furnish [names of the requesting party] in response to their request, the matters expected to be covered in the letter, and the nature of the procedures that we would expect to carry out with respect to such matters.  Based on our discussions with [name of requesting party], it is our understanding that the procedures outlined in this draft letter are those they wish us to follow.  Unless [names of the requesting party] informs us otherwise, we shall assume that there are no additional procedures they wish us to follow.  The text of the letter itself will depend, of course, on the results of the procedures, which we would not expect to complete until shortly before the letter is given and in no event before the cut-off date indicated therein.”


Situations may exist in which more than one auditor is involved in the audit of the financial statements of an entity and in which the reports of more than one auditor appear in the offering document.  This is ordinarily the case when the entity is involved in a business combination.  Other examples may include the audit of significant divisions, branches, or subsidiaries by component auditors.  Comfort letters are requested occasionally from more than one auditor, for example, in connection with an offering document to be used in the subsequent sale of shares issued in recently effected mergers, and from predecessor auditors.  In such circumstances, it is the responsible party of the entity’s responsibility, at the earliest practicable date, to inform any other auditors who may be involved about any comfort letter that may be requested of them and arrange for those other auditors to receive a draft of the underwriting agreement so that those other auditors may make arrangements at an early date for the preparation of a draft comfort letter and for the performance of specified procedures.  The responsible party of the entity or requesting parties are also responsible for arranging for a copy of the comfort letters of component auditors in draft and final form to be provided to the auditor of the group financial statements provided that the group auditor has signed the component auditor’s engagement letter as one of the requesting parties. (Ref: Para. 21)

Changes in the Terms of Providing the Comfort Letter

Performing the Engagement


Comfort letter engagements ordinarily require the following procedures be performed by the auditor: (Ref: Para. 25)

  1. procedures specified by the requesting parties on unaudited interim financial information; and
  2. procedures specified by the requesting parties in respect of selected financial information during the change period.

Commenting in a Comfort Letter on Financial Information Other than Audited or Reviewed Financial Statements



Comments included in the letter will often be related to: (Ref: Para. 26)

  1. Unaudited interim financial information.
  2. Pro forma financial information.
  3. Tables, statistics and other financial information.
  4. Subsequent changes in other specified financial statement items.


The procedures performed with respect to interim periods may not disclose subsequent changes in the specified financial statement items, inconsistencies in the application of the applicable financial reporting framework, instances of non-compliance as to form with applicable legal or regulatory requirements, or other matters about which an auditor’s statement is requested.

Knowledge of Internal Control (Ref: Para. 29)

Unaudited Interim Financial Information (Ref: Para. 30)

Pro Forma Financial Information

Financial Forecast (Ref: Para. 35)

Tables, Statistics, and Other Financial Information


Options for describing the procedures performed and the findings obtained include: (Ref: Para. 39)

  1. describing them individually for each item of specific information on which comment is made;
  2. grouping or summarising some or all of the descriptions, provided:
    1. the procedures and factual findings are adequately described;
    2. the applicability of the descriptions to items in the offering document is clear; and
    3. the descriptions do not imply that the auditor assumes responsibility for the adequacy of the procedures;
  3. presenting a matrix listing the financial information and common procedures employed and indicating the procedures applied to the specific items; and
  4. identifying procedures performed with specified symbols and identifying items to which those procedures have been applied directly on a copy of the offering document, which is attached to the comfort letter.

Change Period Financial Information


Comments regarding subsequent changes typically relate to whether, during the change period, there have been any: (Ref: Para. 42)

  1. changes in share capital;
  2. increases in long-term debt;
  3. decreases in other specified financial statement items;
  4. decreases in net current assets or equity and equity attributable to the company;
  5. decreases in net sales or the total per-share amounts of income from continuing operations and of net income or net income attributable to the company; or
  6. changes in the basis of preparation of the financial information (e.g. different accounting policies adopted).


Procedures may include: (Ref: Para. 43)

  1. reading minutes during the change period and discussing with those charged with governance those meetings for which minutes have not been approved;
  2. reading the unaudited or unreviewed financial information for the change period; or
  3. making enquiries of entity relating to the whole of the change period and obtaining appropriate written representations from the entity to support the answers to the enquiries;

to enable the auditor to state whether anything has come to the auditor's attention that a change, increase, or decrease has occurred during the change period.


In determining whether to accept the comfort letter engagement, the auditor ordinarily considers whether the length of the cut-off period proposed by the requesting parties for the change period financial information is appropriate, having regard to factors such as: (Ref: Para. 44)

  1. the timeframe proposed to be covered;
  2. the time that has elapsed since the issue date of the latest audit or review report on the entity's financial statements;
  3. when the next audit or review report is expected to be issued; and
  4. whether the basis of preparation is consistent with that of the most recent audited or reviewed financial statements.

Publicly listed entities ordinarily have a change period up to six months from the date of the latest audited or reviewed financial statements whilst privately incorporated entities ordinarily have a change period up to twelve months. If the auditor is not comfortable with the proposed change period, it should be discussed with the requesting parties. If the auditor does not accept the proposed change period, the auditor does not agree to provide an auditor's statement in respect of the change period financial information and consequently only reports the results of the procedures performed as specified by the requesting parties in the comfort letter.


Dates as of which, and periods for which, data at the cut-off date and data for the change period are to be compared are to be agreed in the engagement letter. For balance sheet items, the comparison date is normally that of the latest balance sheet included in the offering document (that is, immediately prior to the beginning of the change period). For income statement items, the comparison period or periods might be one or more of the following: (Ref: Para. 49)

  1. the corresponding period of the preceding year;
  2. a period of corresponding length immediately preceding the change period;
  3. a proportionate part of the preceding fiscal year; or
  4. any other period of corresponding length chosen by the requesting parties.


Requesting parties occasionally request that the change period begins immediately after the date of the latest audited balance sheet (which is, ordinarily also the closing date of the latest audited statement of comprehensive income) in the offering document, even though the offering document includes a more recent unaudited balance sheet and statement of income.  The use of the earlier date may defeat the requesting parties’ purpose because it is possible that an increase in one of the items referred to in paragraph A35 occurring between the dates of the latest audited and unaudited balance sheets included in the offering document might more than offset a decrease occurring after the later date.  A similar situation might arise in the comparison of income statement items.  In these circumstances, the decrease occurring after the date of the latest unaudited interim financial statements included in the offering document would not be reported in the comfort letter. (Ref: Para. 50)

Entity Written Representations

(Ref: Para. 53-55)


The auditor ordinarily requests to receive a written representation letter from the responsible party of the entity at the completion of the engagement.[7]  The auditor ordinarily provides the responsible party of the entity with a specific list of matters requiring the entity’s representations.  Such matters may already be contained in documentation reviewed by the auditor, including minutes of meetings, and written acceptance of the engagement letter, and therefore the auditor only needs to request the inclusion of such matters in the written representation letter if the auditor considers it appropriate in the engagement circumstances.  If the responsible party of the entity does not provide a written representation letter, or refuses to provide it, the auditor informs them that the auditor is unable to provide a comfort letter.

Subsequently Discovered Matters

(Ref: Para. 59)


The auditor ordinarily requests a copy of the final offering document (and any document incorporated by reference in it) for the sole purpose of reading it to identify any possible matters that may impact providing the comfort letter, or its final form and content to the entity.  Subsequently discovered matters may include matters identified from reading the final offering document and changes in specified items that are the subject of the comfort letter and have been identified as a result of the procedures performed, but which are not already disclosed in the offering document.  If the matters are already disclosed in the offering document, there is ordinarily no need to include such matters in the comfort letter, except by way of reference to where they are disclosed in the offering document.  If matters are not already disclosed in the offering document, the auditor ordinarily discusses them with the entity and advises that the auditor will include details of the matters in the final comfort letter.  The auditor may also advise the requesting parties of the matters and/or suggest to the entity that the requesting parties be advised.

Format and Contents of the Comfort Letter

Date of the Comfort Letter (Ref: Para. 60(b))


The comfort letter is dated when issued which is ordinarily on, or shortly after:

  1. the entity‟s representation letter is received;
  2. when the underwriting agreement(s) is/are signed;
  3. when the signed engagement letter is received; and
  4. before finalisation of the offering document.


The engagement letter ordinarily specifies the date, often referred to as the cut-off date, to which the procedures specified by the requesting parties in the letter are to relate, ordinarily between three and five working days before the date of the comfort letter.  A factor in considering whether to accept the engagement is whether the period between the cut-off date and the date of the letter provides sufficient time to allow the auditor to perform the procedures and prepare the comfort letter.


The concepts and discussions on obtaining written representations relevant to an audit engagement are contained in Auditing Standard ASA 580 Written Representations, and may be helpful in determining the form and content of written representations applicable to a comfort letter engagement.

Example Engagement Letter

Appendix 1


Download Example Engagement Letter.



Example Entity Representation Letter

Appendix 2


Download Example Entity Representation Letter.


Example Comfort Letter

Appendix 3


Download Example Comfort Letter.


Example Bring Down Comfort Letter

Appendix 4


Download Example Bring Down Comfort Letter.