Statement on Auditing Standards No. 86 provides examples of comfort letters that may be used under the new technical guidance of Statement on Standards for Attestation Engagements No. 8, Management's Discussion and Analysis.

Comfort Letter Guidance
Under this statement, auditors are not allowed to issue additional letters/reports to underwriters or other parties in connection with offerings or placements of securities in which the auditors comment on items for which commenting otherwise is precluded by the statement. The auditor may refer to issued reports on the following:

• Condensed financial statements that are derived from audited financial statements.
• Selected financial data.
• Interim financial information.
• Pro forma financial information.
• Financial forecasts.
• Management's discussion and analysis.

These references must be directed to the auditor's reports that have been previously issued. If these reports are not included in the registration statement, they may be attached to the comfort letter. In these letters, the auditor may agree to comment regarding compliance with SEC rules and regulations.

SEC Compliance
The auditors may express an opinion on whether the form of the financial statements complies with the pertinent SEC accounting requirements. Material departures from these rules should be disclosed in the comfort letter. In addition, the auditor may express positive assurance on compliance with requirements under SEC rules and regulations only as it relates to the rules and regulations applicable to the form and content of financial statements and related schedules that have been audited.

Auditor's Comments
In general, auditors should not comment on certain issues in a comfort letter. Comments should only address information that is expressed in dollars. This information must come from the accounting records that are under the auspices of the client's financial reporting controls.

Likewise, comments should only address information that has been extracted or derived from the accounting records through analysis or computation. The auditor may comment on quantitative information that has been obtained from the accounting records only if that information is subject to the same financial reporting controls as the dollar amounts.

Auditors may also comment as to whether the financial information required because of SEC Regulation S-K is in conformity with the disclosure requirements of Regulation S-K. This may be done when the information has been derived from the accounting records that are subject to the client's controls over financial reporting and may be evaluated against the SEC's established criteria.

Assurance on Conformity with Regulation S-K
Auditors are only allowed to express negative assurance on conformity with the disclosure requirements of Regulation S-K. Since this information is not presented in the form of financial statements, it has generally not been subjected to auditing procedures.

This statement is effective for comfort letters issued on or after June 30, 1998, with earlier application permitted.