CPAs and comfort letters: the new chocolate.

Author:Karl, Edward S.
Position::Certified public accountants
 
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FOR YEARS, CPAs HAVE BEEN ASKED BY third parties for verification, confirmation, certification, corroboration, authentication, or substantiation of their clients' financial information. Negative connotations have often been associated with these requests--liability concerns, client alienation, confidentiality breaches, ethical issues, possible Gramm-Leach-Bliley Act violations, professional standard prohibitions, and Internal Revenue Code penalties.

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To me, though, the news is not all bad. The AICPA is doing its part to help members manage these risks, most recently by developing guidance for providing the U.S. Department of Agriculture's Farm Service Agency (FSA) with certifications associated with persons who receive certain farming program payments.

In part, the AICPA Tax Section's mission statement indicates "[t]he Tax Section serves the public interest by assisting AICPA members to be the most trusted professional providers of tax services. ..." From a tax perspective, these requests for "comfort letters" seem to validate the notion that CPAs are "the most trusted providers." In a fun sense, CPAs are the financial world's comfort food--the new chocolate!

How great is it that the financial world looks to CPAs for help in various forms:

* Mortgage companies and other lenders' requests for clients' tax and financial information;

* State administrative agency requests associated with contractors;

* FedEx's inquiries into its franchisees' payroll tax practices; and

* Credit Suisse Group AG's U.S. tax return preparer notifications and certifications regarding Form TD F 90-22.1, Report of Foreign Bank and Financial Accounts (FBAR).

Even adoption agencies and health insurance providers have jumped on the band-wagon--the list goes on and is growing.

But the concerns regarding these types of requests are real. Sue Coffey, AICPA senior vice president-Public Practice 8c Global Alliances, gives a good snapshot of these risks in an AICPA Insights blog post from March 15 titled "The Dangers of Providing Client Comfort Letters" (available at tinyurl.com/cs73qde).

From the AICPA's perspective, though, helping members not only manage risks but also take advantage of opportunities is critical. When the Institute first became aware of the FSA issue last year, I spoke to a CPA in the Midwest who had received a number of the FSA's certification requests. I conveyed my concerns about certifying tax return data. Certification goes way beyond the AICPA...

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