Accountant's Letter

Written by:
Image
Paul Tracy

Paul has been a respected figure in the financial markets for more than two decades.

Prior to starting InvestingAnswers, Paul founded and managed one of the most influential investment research firms in America, with more than 2 million monthly readers. While there, Paul authored and edited thousands of financial research briefs, was published on Nasdaq. com, Yahoo Finance, and dozens of other prominent media outlets, and appeared as a guest expert at prominent radio shows and i...

View all posts
Updated August 22, 2020

What is an Accountant's Letter?

An accountant's letter, also called an auditor opinion, is a written statement describing an auditor’s independent, unbiased and qualified evaluation of the accuracy and completeness of a company’s financial statements and practices, as well as an evaluation of a company’s compliance with Generally Accepted Accounting Standards (GAAP).

How Does an Accountant's Letter Work?

When an auditor feels that a company’s financial statements are fair and accurate, it issues an unqualified opinion and does so using a standard reporting template (this is why many opinions read the same way). An accountant's letter also includes a statement that the audit was conducted in accordance with GAAP. When the auditor cannot give an unqualified opinion, it issues a qualified opinion, which lists the reasons for the auditor’s concern about the company’s financial statements and controls and the possible effects on the financial statements.

Here is an example of an accountant's letter, for the Disney Corporation:

Why Does an Accountant's Letter Matter?

An accountant's letter is an opinion of the trueness and fairness of a company’s financial statements. This is done for the sake of the shareholders, regulatory authorities, lenders and other people with an interest in the health of the company.

There is always a chance that an auditor gives an unqualified opinion when in fact the financial statements are materially misstated. This is called audit risk, and the auditor must use his or her judgment about how much is acceptable and what errors are material enough to warrant the restatement of the financials. In these situations, the definition of the word material becomes especially important, because shareholders, lenders and other interested parties make crucial decisions based on the quality of the information in a company’s financial statements.
 

Ask an Expert about Accountant's Letter
At InvestingAnswers, all of our content is verified for accuracy by Paul Tracy and our team of certified financial experts. We pride ourselves on quality, research, and transparency, and we value your feedback. Below you'll find answers to some of the most common reader questions about Accountant's Letter.
Be the first to ask a question

If you have a question about Accountant's Letter, then please ask Paul.

Ask a question

Read this next

Don't Know a Financial Term?
Search our library of 4,000+ terms
 - profile
Ask an Expert about Accountant's Letter

By submitting this form you agree with our Privacy Policy

Share
close