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Letters of support

Auditors’ judgements on promises of financial support may be easier to make with the assistance of faculty guidance.

Various scenarios may result in the provision of a letter of support and they almost always require very careful consideration by auditors. Pandemic conditions have increased the likelihood that a parent entity, director, shareholder, lender or other party may write such a letter to a company or group entity, declaring their willingness to provide financial support if this should become necessary. So, many more auditors than usual may need to decide whether such a letter of support may be relied on as audit evidence.

When using your professional judgement in determining what constitutes sufficient appropriate audit evidence, this assessment needs to be made on a client-by-client basis and there are a number of factors to take into consideration. To assist with this, when that evidence is a letter of support, the faculty has created guidance.