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The club could face a fine, and possibly a league points deduction, for the letter, which was submitted when current owner Gino Pozzo took full financial control over the club.
The letter, which features an HSBC letterhead, said that Pozzo had sufficient funds to bankroll the Hertfordshire club, and that the bank would offer him a guarantee if necessary.
It was submitted before the club's 2014/5 campaign, in which they won promotion to the Premier League from the Championship division. It read:
"Our client - Hornets Investments Limited - has sufficient financial resources with HSBC Bank that would allow us, if needed, to issue on behalf of Hornet Investments Limited a cash-backed unsecured bank guarantee up to the amount of GBP 7 million for the funding of The Watford Association Football Club."
Watford currently sit ninth of the 20 teams in England's top league on 12 points, but they are only five points above the relegation zone at this early stage in the season.
Any points deduction would be likely to have a significant impact. In 2009/10, Portsmouth FC suffered a nine-point deduction after the club went into bankruptcy administration, finishing bottom place and 11 points off their nearest rival.
There is no known precedent for the alleged offence in question, however.
There is also no suggestion that Italian owner Pozzo had any knowledge of the falsified document. The club's executive chairman Raffaele Riva suggested that a third party who was helping the club with its restructuring at the time is responsible.
Riva told The Telegraph: "In 2014, there was a restructuring of the shareholding of the ultimate parent company of Watford Football Club. I compiled some of the documents required by the EFL which related to Hornets Investment Limited, which is the holding company, including a letter of support from a bank as a proof of funds for the EFL."
'To facilitate this I asked a third party, X, to assist. I trusted X to do so because, at that time, we worked together on other projects. I have not worked with X since the end of 2015," he said.
"No other individual at Watford FC was in any way involved in obtaining the letter. The letter was submitted to the EFL via Watford FC along with the other documents. It has come as a huge shock to be notified there are doubts over the veracity of the letter," he added.
Watford will be judged according to EFL rules from 2014, when the letter was sent. Punishments range from straightforward fines to points deductions and expulsion from domestic competitions.
The Telegraph passed a copy of the document onto the EFL, the police, and HSBC.
An EFL spokesman said: "We can confirm, following receipt of information from The Daily Telegraph, that we immediately commenced a disciplinary investigation into serious allegations made against Watford Football Club."