Comfort Letters Law and Legal Definition
A comfort letter is a document prepared by an accounting firm. It is also called solvency opinion. It assures the financial soundness or backing of a company. A comfort letter can be used as a written assurance by a subsidiary's parent company or bank to offer assurance to the buyer regarding the seller's ability or willingness to perform his/her obligations. Comfort letters are often used because the seller is unable or unwilling to provide a guarantee on a certain outcome.
A comfort letter gives an assurance that no indication of false or misleading information in the financial statements are being used in connection with a securities offering. An accounting firm provides a comfort letter only after a full audit has been done. The comfort letter also states that the auditor is confident that a full audit would not uncover anything unusual that would negatively affect the issue of the comfort letter.