CPAs are commonly asked to verify business information including ownership, finances and available funds. This is a useful part of business operations and often part of the bank lending process. Some banks go as far as to ask for verification of an opinion, which if course is not possible. But to the extent that a verification is possible under professional standards, I like to help clients by issuing verification letters.
There are three simple, clear and nonnegotiable points, however, for these CPA verification letters:
- CPAs may verify facts, not opinions. An example of a fact is “Jane Doe is the only person listed and listed as a sole proprietor on the business license”. An opinion is “Jane Doe owns 100% of the business”. A fact is “I have reviewed the tax return transcripts provided by the Internal Revenue Service for Jane Doe Enterprises and Jane Doe is listed as the sole proprietor on each year’s tax return from 2000 through 2019. An opinion is “Jane Doe earns enough money to pay her mortgage”.
- Price is driven by the peer review. The CPA verification letter must, by law, be included in a process called “peer review”. Peer review is expensive and time-consuming. The CPA’s cost for this review service is at least $1,200. So the total cost of an accountant’s letter – even if it is only one sentence long – is going to be more than $1,200.
- Allow a reasonable amount of time. It takes time for a CPA to produce the required documentation for these verification letters. It may seem like it takes only 15 minutes to draft, type and print the short letter letter but the required documentation of the process for review purposes takes much longer. It is unreasonable to ask your CPA to prepare a verification letter on short notice.
So while CPA letters are common part of small business, they may not be as quick and easy as you thought.
See also: http://tonynovak.com/accountants-letter/