Signed Financial Statement For A Lender

[KMACK]

I received a request from a self-employed tax client who is refinancing his mortgage.  He says the lender has asked for "audited" or signed financial statements from his tax preparer as part of his loan documents.  He says the lender is requiring it as a new COVID-19 requirement.

I am hesitant to provide this for two reasons.  I am concerned about possible liability issues if he defaults on the loan as well as the rules about disclosing client information to a third party.  In addition, I am not his bookkeeper (he does his own books).

Has anyone had experience with this or with this type of request?

KMACK

[abctax55]

Tell the lender to pound sand...

Here's a thread on it from a while ago:

https://proconnect.intuit.com/community/proseries-discussions/discussion/how-do-other-tax-preparers-...

[Just-Lisa-Now- · Accepted solution]

You are only responsible for and can sign the tax return you prepared. 

They are probably doing this because they cant pull IRS transcripts to verify income, thats none of your concern though, dont let them bully you.

Give them the Form 9325 showing that the return has been filed and accepted, along with the return that youve put your name to as paid preparer.

Im sure if you call your E&O insurance company they will advise against you signing anything like that.

[rbynaker]

First of all, if you're not a CPA, you can't audit a financial statement.  If you are a CPA, then you have to follow the strict auditing rules of the AICPA.  Here's a good concise AICPA position paper on the subject:

https://www.aicpa.org/content/dam/aicpa/interestareas/frc/downloadabledocuments/third-party-verifica...

So basically the lender doesn't get what they want but they get a piece of paper to stick in the file and that's usually enough to keep the ball rolling.

I haven't seen one in a while, sorry to see these requests rearing their ugly head again.  AFAIK the 2014 language is still relevant and isn't exactly CPA specific (but read through it and see if something needs to be tweaked.)

Rick

[rbynaker]

Here are some sample disclosure letters.  The "bank" template is on PDF page 7:

https://www.calt.iastate.edu/files/files-page/Sample%20Client%20Ltrs.%20%26%20Disclosure%20Consents....

[abctax55]

I doubt seriously that the underwriter has a friggin' clue what an 'audited' financial statement even IS !

The letter I have is from the AICPA (I've modified it a bit over the years...); it basically says "read the damned tax return & form your OWN opinion of the borrower's credit worthiness" but in a lot more words.

I've had push back before (back when these requests were fast/furious) but I've never had a client lose a loan because of the wording on the letter.

They want:

1) a piece of paper for their files

2) someone ELSE on the potential hook in case of default.  

[TaxGuyBill]

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@abctax55 wrote:

I doubt seriously that the underwriter has a friggin' clue what an 'audited' financial statement even IS !

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It probably isn't the underwriting asking for it.  It is the 'front man' that gives the information to the underwriter.  Some of them try to come up with as much as possible to give to the underwriter so they don't reject it.

I've written letters that basically says (1) the client keeps their own unaudited books (2) that I've prepared their tax return with the information they provided me and (3) I have no reason to believe the information they provided me was incorrect.  That has always satisfied them in the past.  I try to intentionally phrase it in a repetitive way to try to convey to the mortgage guy that he is an idiot.

[KMACK]

Thank you.  I have some good information to go back to the client with to explain why I am not going to provide the requested information.

KMACK

[KMACK]

Thank you.

KMACK

[KMACK]

Thank you.