Statement on Auditing Standards 129: Amendments to Letters for Underwriters and Certain Other Requesting Parties

By: Wesley Allen

The Auditing Standards Board released SAS 129 in August 2014, to add certain amendments to guidance on the auditor’s responsibilities when issuing comfort letters included in registration statements and securities offerings. It also amends certain guidance with regard to a requirement to attach a review report in the comfort letter and other clarifying changes as a result of the adoption of clarity standards.

Most of the changes in the guidance were technical corrections and clarifications of examples, along with editorial changes for clarity and consistency.

Specifically, the key changes in the issuance of SAS 129 are as follows:

It amends the requirement to inform the requesting party that the auditor cannot provide any assurance regarding the sufficiency of the procedures for the requesting party’s purposes, by changing “state in any discussion” to “communicate,” so as to provide the auditor with more flexibility in making this required communication. However, this change to the standards did not impact the disclosures regarding sufficiency of procedures in the example comfort letters contained in Exhibit B of AU-C 920, but simply added clarity to the manner of communication.

It clarifies the requirement for the auditor to read the comfort letter issued by component auditors, whose report is included in the securities offering, applies to each component auditor, not only those comfort letters related to significant components. This revision did result in minor changes to the alternative wording in Example J of AU-C 920, applicable to a comfort letter when component auditors are involved.

The guidance amends the requirement to attach the review report when the auditor states in the comfort letter that he or she has performed a review of unaudited interim financial information to a requirement, to attach the review report when the auditor states in the comfort letter that he or she has issued a review report on unaudited interim financial information. SEC requirements for reviews of interim financial statements do not require the issuance of a review opinion in conjunction with the review, and AU-C 920 previously stated the review report should be attached if the auditor “has performed a review” on the unaudited interim financial information. The guidance further amends the application section in AU-C 920 to state that attaching the review report on unaudited interim financial information to the comfort letter is required if a review report has been issued.

The guidance also amends certain disclosures in example D covering pro forma financial information. The changes update the concluding paragraph in Example D-1 to refer specifically to the applicable accounting requirements of the SEC’s Rule 11-02 of Regulation S-X, rather than simply referring to the pro forma bases described in the notes to the pro forma financial statements. It also re-numbers example D to Example D-1 due to the addition of Example D-2 (discussed below).

The guidance also adds example D-2 to address providing negative assurance on pro forma financial information as to comply with pro forma bases, as described in the pro forma financial information. This revision is a direct result of the changes referred to above, wherein Example D-1 refers specifically to Rule 11-02 of Regulation S-X.

Finally, SAS 129 amends example O, Alternate Wording When the Procedures That the Requesting Party Has Requested the Auditor to Perform on Interim Financial Information Are Less Than a Review in Accordance With Generally Accepted Auditing Standards Applicable to Reviews of Interim Financial Information, to address procedures performed with regard to pro forma information (specifically paragraph 5). Example O was also amended to mention the procedures performed during the subsequent change period (specifically paragraphs 4.b and 4.c), which was not previously carried forward from AU section 634, Letters for Underwriters and Certain Other Requesting Parties into the clarified standards.

The amendments described in this SAS are effective for comfort letters issued on or after December 15, 2014.

f8_049crop_Wesley AllenWesley is a Director in the Financial Institutions Services Group at Dixon Hughes Goodman LLP, in Charlotte. He currently serves on NCACPA’s Accounting & Attestation Committee. Wesley can be reached at