What Is an Accountant's Letter?

An accountant's letter is a written communication that usually precedes a financial report. An accountant's letter is produced by a company's independent auditors. It summarizes the scope of the accountant's audit and its results in very general terms. The term is frequently used interchangeably with the term "auditor's opinion."

Understanding an Accountant's Letter

The accountant's letter usually expresses a "clean" opinion, which means the accountant or accounting firm believes the financial statements are accurate and that they fairly present the company's financial condition, known as an unqualified opinion.

A 澳洲幸运5官方开奖结果体彩网:qualified opinion indicates deficiencies in the company's procedures or presentation, meaning the financial statements may not be accurate or may not conform to 澳洲幸运5官方开奖结果体彩网:generally accepted accounti♑ng 💟principles (GAAP). For companies outside of the U.S., this would indicate a failure to comply with 澳洲幸运5官方开奖结果体彩网:Internati💯onal Financ⭕ial Reporting Standards (IFRS).

The a🌳ccountant’s rep🤡ort also states the period of time covered by the financial statements as well as the method of accounting (GAAP or cash) the company presenting the statements uses.

An 澳洲幸运5官方开奖结果体彩网:adverse opinion, which indicates that a company's financials are misrepresented, is yet another possibility. The most well-known opinion is the 澳洲幸运5官方开奖结果体彩网:going concern, which means that the accounting firm has doubts about the company's financial health and its a♋bility to remain in business.

An accountant's letter along with the inclusion of the auditor's opinion provides significant insight into the health of a company that is useful for investors and shareholders; however, given past history, such letters may not reveal a company's true financial standing, witnessed through many accounting scandals, such as Enron and Worldcom.

What Is Included in an Accountant's Letter?

A number of federal and state regulatory agencies issue and enforce requirements that stipulate what information should be included in an accountant’s letter. These include the 澳洲幸运5官方开奖结果体彩网:🔯Commodity Futures Trading 🧜Commission (CFTC), the 澳洲幸运5官方开奖结果体彩网:Securities and Exchange Commission (SEC), the 澳洲幸运5官方开奖结果体彩网:Federal Depo𒁃sit Insurance Corporation (FDIC), and state regulatory bodies.

Among other requirements accountants must meet to support their qualifications to issue accountant’s letters are: that they are independent of the firm’s about which they are issuing opinions; that their practices are in conformance with accounting standards as set out by the American I🅘nstitute of Certified Public Accountants (AICPA), the industry’s trade association which sets ethical and professional s👍tanda🌟rds and grants credentials; that the accountant has a license issued by the state in which it practices, and that it is a “member in good standing in the AICPA.”

Because the accountant’s letter is disseminated together with a company’s financial reports, it is considered an integral part of analysts' and investors’ view of the firm. Over the years, regulators have launched investigations, filed suit for fraud, and taken enforcement actions against accounting firms for fꩲailing to accurately present their opinions as well as for negligence in arriving at their opinions. One major case involved a⛄ccounting firm Arthur Andersen’s accountant’s letters for financial reports.

An accountant's letter is not enough for an investor or shareholder to understand a company's 澳洲幸运5官方开奖结果体彩网:financial health or its reporting accuracy. Knowledge of the business, the industry the company operates in, as well aꩲs the information contained in the financial statements, is all needed to properly assess a good or bad investment.