SAS 72 Auditor Representation Letter

Summary

This template SAS 72 auditor representation letter (also referred to as an underwriter representation letter or auditor representation letter) may be delivered by financial intermediaries or certain other participants in securities offerings to an issuer's independent accountants to request a SAS 72 comfort letter. This template includes practical guidance, drafting notes, and an alternate clause. A named underwriter for an offering registered under the Securities Act of 1933, as amended (Securities Act), does not need to provide an SAS 72 auditor representation letter to receive a SAS 72 comfort letter because the comfort letter supports the due diligence defense provided to underwriters of registered offerings by Section 11 of the Securities Act (15 U.S.C. § 77k). Participants, other than named underwriters (e.g., selling securityholders or sales agents), in registered offerings, and financial intermediaries (e.g., initial purchasers or placement agents) in certain unregistered offerings (e.g., offerings conducted in accordance with Securities Act Rule 144A (17 C.F.R. § 230.144A), Regulation D, or Regulation S), may receive a comfort letter by providing the accountants with a signed auditor representation letter to the effect that they have conducted a due diligence review regarding the issuer that is (or will be) substantially consistent with the due diligence review an underwriter would perform for a registered offering by the issuer. The requirements for SAS 72 comfort letters were first articulated in Statement on Auditing Standards (SAS) No. 72, which was superseded by Auditing Standards 6101 (AS 6101) issued by the Public Company Accounting Oversight Board. However, the term SAS 72 is still commonly used when referring to accountants' comfort letters. Note that although paragraph .07 of AS 6101 provides an example of an audit representation letter, accountants will often provide their own form letter. Regardless of the language used, early communication between the requesting party and the issuer's accountants is vital to ensure that the representations made are acceptable to both parties and that the comfort letter can be delivered in a timely manner. For a full listing of related due diligence for securities offerings content, see Due Diligence for Securities Offerings Resource Kit. For more on IPOs generally, see Initial Public Offerings Resource Kit. See SAS 72 Auditor Representation Letters for a more detailed discussion of auditor representation letters. For more information on comfort letters, see IPO Key Documents and Comfort Letter Review and Negotiation Checklist. For additional information on due diligence, see Accounting Due Diligence and Top 10 Practice Tips: Underwriters' Counsel Due Diligence for Securities Offerings.