What You Need To Know About An Accountant’s Letter
What is an Accountant’s Letter?
An Accountant’s Letter is a document requested by a lender or bank when a client is seeking finance.
These letters can ask for anything from confirming historical financial information to forecasting future events, or even asking us to determine a client’s ability to repay the loan.
Australian accounting bodies take a joint approach in discouraging us from providing these letters as they believe it is the lender’s responsibility to handle a credit assessment and make a judgement based on that. However, we may decide to support our clients and provide a letter based on what is being asked.
There are only certain circumstances where we will provide a letter such as if the lender is requesting factual information. As accountants, we have no legal requirement to act on your request, assess your capacity or take responsibility for any statements you’ve provided to the bank.
If we choose to provide this letter, there are some obligations we must abide by. As the bank is relying on this information to verify your financial situation, we can be held personally liable if we provide incorrect or subjective information. The risk of a credit assessment may also be shifted to us so there could be substantial legal risks involved.
It is extremely important that we review the requirements carefully before proceeding and decline the request if necessary.
What information can we provide in a letter?
Aintree Group can only provide information that is factual and accessible to us, such as:
- Your taxable income.
- How you’re receiving your income.
- Your lodged tax returns.
- Confirmation of past account audits.
We may also provide a cash flow forecast of your future income and spending, but this is dependent on the situation.
What information can’t we provide in a letter?
We cannot provide the following subjective information due to specific professional obligations:
- Whether your business can adhere to their long term financial obligations.
- Whether we believe you can pay the loan off.
Note: Even though we may not be able to provide a letter for you, we can still prepare your financial statements to assist you with the application process.
If you’d like to discuss whether we can help you with your application, please contact your Aintree Group adviser today!
This is general advice only and has not been prepared with your situation and needs in mind. For individual and personalised advice, we highly recommend that you seek out proper professional advice from your accountant and lawyer.
