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Bank Comfort Letters


Bank Comfort Letter

A longtime client recently asked me to sign a verification of employment form that his bank had requested as a part of refinancing his home loan.  The form listed, among other items, his compensation for 2013, 2012 and 2011, and a statement relating to the prospects of continued employment.  My client is the employer/company and not the employee. I had decline the request, which might cost me the client.  I have had similar requests to confirm self-employment status or to state that the using of the client’s funds for a down payment would not jeopardize the financial viability of the client’s business.  I routinely decline these requests, or respond in such a way that does not give the bank the “comfort” it seeks.


As a CPA I am governed by four sets of rules—the regulations of the US Internal Revenue Service, the Washington State Board of Accountancy, the American Institute of CPAs/Washington Society of CPAs, and my insurance carrier.  Two principals of these rules are the reason for my response:


      I cannot and will not divulge client information to third parties without the client’s express written consent, unless compelled to by a legal summons or court order.


      I can only state that which I know to be true.  To do otherwise would be to violate the professional standards of my profession.


In the case of the employment verification request, I can state that I prepared the 2011 tax return that contained a deduction for compensation.  I had not yet prepared the 2012 tax return, and 2013, as well as the statement about continued employment is sheer speculation. I do not know for a fact that the individual was in fact an employee of my client. I cannot comment on that which I do not know to be fact.


I trust my clients (or they would not be my clients), but I do not verify the information they provide for the preparation of a tax return.  I can state that I have a Form W-2 from XYZ Company that reports compensation paid the client by the company, but I do not know as fact that the client is an employee of the company.


What is the point?  The banks are looking for a scapegoat in case something goes wrong with the loan, and CPAs make good scapegoats.  If I were to respond to the bank’s request, I would jeopardize my ability to practice as a CPA, and would incur substantial financial exposure to the bank.


I trust my clients understand this dilemma.