Hold your tongue: tread carefully when lenders ask about client finances.

• Author: Holl, Suzanne M.
• Position: Bestpractices

in these challenging economic times, CPAs remain under fire from banks and other lenders pressuring them to provide assurance-type opinions regarding the financial strength of their clients.

Mary CPAs have shared their frustrations and concerns with CAMICO regarding the veiled threats they have received from aggressive brokers and lenders telling them that, unless they meet their demands for a letter confirming their client's loan qualifications. the client will not qualify for the loan. Some brokers even suggest the client should seek "a more cooperative" CPA. Gurrent economic challenges magnify these concerns for CPAs.

Tempting as it may be line CPAs to comply with such requests and provide the requested assurances, doing so could put CPAs and their licenses at significant risk.

First, CPAs may lace the risk of falling below professional standards if they don't adhere to ARTA Professional Standards AT Section 9101, Attest Interpretation No. 2. "Responding to Requests for Reports on Matters Relating to Solvency."

Another risk is that lenders would allege CPAs misrepresented their clients' creditworthiness should their clients later delimit on the loans in question. CAMICO has faced claims scenarios in which lenders have gone after the CPA after the client defaulted. The allegations against CPAs included negligent misrepresentations based on CPAs' assurances regarding their clients' sell-employment status and financial condition and/or creditworthiness.

Use Professional Judgment

The creditworthiness dilemma is a balancing act CPAs need to carefully evaluate the risks associated with complying with these requests. For example, since professional standards do not require CPAs 10 provide any letters to third parties. consider the risks of Just saving. "NO," e.g., losing the client: being sued by the client should the loan fall through: versus the risks of saying "Yes": e.g., becoming a "deep pocket" target down the road for the lending institution if the client defaults; falling below the professional standard of care .

Following arc examples of recent trends and some ideas on how to traverse the delicate balance of controlling your risks while managing client and third-party expectations.

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Trend 1: Verification of Tax Information/Employment/Self-Employment

One recent trend is financial institutions sending forms directly la the CKA requesting:

1. Verification of tax information, employment or self-employment: and

2. ...