Accountant’s letters continue to be risky territory: Guidance available

The article is relevant to members in Australia and was current at the time of publication.

Predicting the financial future for clients can be risky territory for accountants. 

Yet requests for accountant’s letters that forecast how a business may perform continue to present a challenge for practitioners. 

“While the Australian Banking Association changed the Code of Practice (Code) in February 2025 to say a bank will not ask a third party, such as your accountant, to certify a client can repay a loan, that only applies to banks that signed up to the Code,” says Neville Birthisel, Advisor, Regulations and Standards, CPA Australia.

“Other parties, such as brokers or financial intermediaries, are still asking for whatever they want.”

Requests from state governments and their agencies to support applications required to operate security businesses, or even entertainment events, or for building contractor registration, also pose challenges.

“We had a client applying for a private security licence who wanted a statement of financial viability,” says Andrew Panayiotou CPA, Director – Business Services, McMillans.

“But advice from our professional bodies couldn’t be clearer: there are some things we simply can’t say, for example, that a business is profitable and can pay its debts, because those statements are not covered by professional indemnity insurance.

“We do find that these requests are more difficult to say no to than those connected to lending because the client has received a request from a government agency,” Panayiotou says.

Tyler Wise FCPA, Director of Wise Forensics, agrees: “Requests for accountant’s letters are always uncomfortable because, as practitioners, we deal in retrospective information for clients. 

“Some clients accept a refusal at the time, then, once they speak to a broker, for example, we can look as if we are not advocating for them.

“It’s especially annoying when we are provided with a template that a third party just wants our signature on. We can’t accept it. Our signature carries weight.” 

Fortune telling v full audit

Lenders’ requests to accountants to provide signed accountant’s letters, also known as “accountant’s declarations” and “capacity to repay” certificates, has long been a tricky issue, says Birthisel. 

These requests may ask accountants to confirm they have fully assessed a client’s financial position and then certify a borrower’s ability to make loan repayments.

But doing so can expose accountants to potential legal recourse, including significant financial claims from lenders, should a client they have vouched for default on a loan or miss a repayment, he says. 

As well as requests relating to loans or business licences, accountants can also be asked to provide statements about a client’s financial health for purposes ranging from visa applications and commercial or residential leasing to government grants and insurance claims.

In these situations, accountants should generally decline to provide the requested certification, unless a full audit is performed and the letter is based on that audit, says Birthisel. 

“An audit provides some rigour around certification and practitioners are breaching APES 110 Code of Ethics for Professional Accountants and APES 210 Conformity with Auditing and Assurance Standards if they don’t perform one.

“If things go awry, it's the practitioner who bears the risk, not the possibly bankrupt client.”

 Undertaking an audit may not be a viable option for accountants who are not registered auditors.

Other high-risk activities include engagements to authenticate documents and explain the impact of a financing facility to your client – unless you hold an Australian Credit Licence. 

Lower-risk engagements can include assisting a client to prepare information for a lender or relevant agency, such as financial reports, current business plans, budgets or budgeted information, which may include forecasted revenue and expenses.

If the engagement involves compiling financial information, practitioners should follow the requirements of APES 315 Compilation of Financial Information, including issuing a Compilation Report where required, says Birthisel. 

“Engagement terms should still be clearly documented so clients understand the limitations of the work,” he says.

“In addition, practitioners should ensure that appropriate disclaimers are included in any correspondence with clients’ lenders or the relevant agency.”

In some instances, a client may simply ask their accountant to provide copies of existing documents to a lender or relevant agency.

These documents should be historical, accurate and bona fide, and practitioners should obtain written consent from the client before sending them.

For practitioners the message is clear, says Birthisel. “You are not a fortune teller. Stick with what you know and, before you sign, think about how much your house is worth.”