Creditworthiness Verifications for Clients Who Received PPP Loans

by Duncan B. Will | Apr 23, 2021
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Q: Our firm is receiving an uptick in requests from lenders for creditworthiness verifications for clients who received loans under the Paycheck Protection Program (“PPP”). How should we respond?

A: Many lenders, in response to economic challenges precipitated by the pandemic, have stated that they needed to have the borrowers’ accountants sign financial statements supporting borrower loan applications. Government regulations do not require this step. Camico has historically cautioned accountants not to accommodate such requests. Accommodating these requests is not required and could violate professional standards were the accountant to provide assurances regarding a borrower’s ability to repay the debt or solvency.

Instead, Camico discourages accountants from communicating directly with the lender. If the accountant were to choose to do so, then Camico has offered wording to specify the services performed, point out that those services did not contemplate accommodating this request, and indicate that the lender would need to rely on its own underwriting procedures. Prior to the issuance of SSARS No. 21 in October 2014, accountants would have been required to perform a compilation of financial statement engagement were they to provide financial statements in support of a lender’s request. AR-C Section 70 of SSARS No. 21 introduced the preparation of financial statement engagement. Accountants who perform this service typically do not issue a report and instead prepare financial statements with a legend appearing on each page which clearly states that no assurance is provided.

However, accountants may issue a disclaimer report when engaged to perform a preparation of financial statements. Camico has steadfastly discouraged accountants from using the disclaimer report option, as doing so would eliminate the anonymity associated with the typical “legend” approach which does not require a disclaimer. This scenario could be the exception that defines the rule. If the lender insists on receiving a “financial statement signed by the borrower’s accountant,” CPAs may choose to accommodate the request by performing a preparation engagement and issue a disclaimer report. CPAs choosing this path will need to obtain a signed engagement letter detailing the client’s and accountant’s mutual responsibilities. Neither the compilation report nor the disclaimer report provides assurance, but the language in a disclaimer is concise, and the engagement would not subject the firm to peer review if not already subject to peer review.


An illustrative disclaimer might read:

The accompanying financial statements of as of and for the year ended , were not subjected to an audit, review, or compilation engagement by and do not express an opinion, a conclusion, nor provide any assurance on them.

[Signature of ]
[Accountant’s city and state]
[Date]

Duncan Will 11-2020Duncan B. Will, CPA/ABV/CFF, CFE, is Loss Prevention Manager/Accounting & Auditing Specialist with CAMICO (www.camico.com). Mr. Will leverages his more than 30 years of experience in accounting, including public accounting, forensic accounting, consulting, and audit and tax compliance, to manage the Loss Prevention department and to deliver policyholder service.

This article appears in the spring 2021 issue of the Washington CPA magazine. Read more here.

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