Ch. 4 Notes Flashcards
When should the dating of a comfort letter be?
Dated on or shortly before the effective date of the registration.
To whom should a comfort letter be addressed?
To the client, named underwriters, broke-dealer, or the financial intermediary related to the securities involved.
How does an independent accountant’s ‘letter for underwriters and certain other requesting parties’ (comfort letter) assist an underwriter or others?
Helps underwriters or others having a statutory due diligence defense establish a ‘reasonable investigation’
(Not require by SEC)
Who signs comfort letters? Who are comfort letters addressed to?
Signed by Independent Auditor
Addressed to Independent Auditor
What is GAGAS?
Generally Accepted Government Auditing Standards
Who issues GAGAS?
Issued by the Gov’t Accountability Office (GAO) – Yellow Book
What are the “Three C’s” of key concepts of GAGAS?
Controls: Must issue a report on I/C over financial reporting
Compliance: Must issue a report on compliance
Crimes: Must report all known illegal acts that could result in criminal prosecution
What is the Single Audit Act of 1984?
State/Local Gov’t expending 750K in federal funding must be audited
What are the three biggest differences between Gov’t Auditing Standards relative to the AICPA’s Auditing Standards?
- Gov’t Standards require a written report on internal control
- Gov’t Standards require a written report on compliance with applicable laws and regulations
- Gov’t Standards require the auditor report any known instances that could result in criminal prosecution
What are the requirements of the Single Audit Act?
A single coordinated audit of the aggregate federal financial assistance provided to the state and local gov’t entity with emphasis on major assistance programs
Auditor’s responsibilities regarding communication of “significant deficiencies” under gov’t auditing standards?
Obtain response from officials of the entity and include a copy of any written response in auditor’s report
