Public Audit & Assurance

Audits (e.g., for Form 10-K) provide the highest level of assurance. They must be conducted in accordance with PCAOB standards, which include extensive testing of financials, internal controls, and compliance with U.S. GAAP.

Reviews (e.g., for Form 10-Q) offer limited assurance. The auditor primarily conducts analytical procedures and inquiries without the depth of testing performed in a full audit. Although less rigorous, quarterly reviews remain subject to PCAOB standards (AS 4105).

Example: A large accelerated filer on NASDAQ typically has an annual PCAOB-audited Form 10-K and three interim reviewed Form 10-Qs each year.

Generally, YES. Other SEC registrants (such as smaller reporting companies, business development companies, or special purpose acquisition companies) still fall under the SEC’s purview and typically require audits conducted under PCAOB standards.

The difference lies in the filing deadlines and certain scaled disclosures for smaller reporting companies versus large accelerated filers, but the requirement for a PCAOB-registered firm usually remains.

Example: A smaller reporting company that files quarterly and annual reports with the SEC must include audited financials following PCAOB standards in its Form 10-K.

1. PCAOB-Compliant Audits: Your historical financial statements must be audited according to PCAOB standards, typically for the past two or three fiscal years (depending on your status as an emerging growth company).

2. Registration Statement (Form S-1): Must include audited financials, management discussion & analysis (MD&A), and risk factors.

3. Internal Controls & Governance: The SEC and potential investors expect robust internal control over financial reporting (ICFR) and clear corporate governance structures.

Example:A tech startup aiming for a NASDAQ listing will need at least two years of PCAOB-audited financials included in its Form S-1, along with a thorough MD&A analyzing significant trends and risks.

It depends on the offering amount within a 12-month period:

1. Offerings up to certain thresholds (historically $107,000 or so, though this can be adjusted) may only require unaudited financials, with certain exceptions.

2. Offerings above threshold levels might require reviewed or even audited financial statements.

Example: A startup raising $2 million under Reg CF typically needs audited financials, while a smaller offering under $250,000 may only require a review or less (depending on updated rules).

OTC-traded companies often must still comply with SEC disclosure standards if they are SEC registrants (e.g., Forms 10-K, 10-Q, and 8-K).

For companies exempt from formal SEC reporting (e.g., Pink Sheets “Alternative Reporting” companies), they must follow OTC Markets disclosure rules, providing current and accurate financials for the marketplace.

Example: An OTCQB-listed entity typically files regular SEC reports, while a Pink Sheets issuer may provide alternative disclosures through the OTC Disclosure & News Service.

Missing deadlines for 10-K 10-Q or can trigger:

1. Late filing labels (e.g., “NT 10-K/Q” for non-timely filings).

2. Potential loss of “current” status, impacting investor confidence.

3. Risk of delisting, SEC enforcement actions, or accelerated maturities on debt covenants.

Example: A company that fails to file a 10-K on time may receive deficiency notices from its exchange and can face devaluation in share price.

Yes, for accelerated and large accelerated filers, Section 404(b) of the Sarbanes-Oxley Act requires an external audit of ICFR.

Non-accelerated filers and certain emerging growth companies may be exempt from the external auditor attestation requirement but must still maintain adequate internal controls.

Example: A smaller reporting company may not need a separate ICFR audit, but must still disclose management’s assessment of controls in its 10-K.

Yes, for accelerated and large accelerated filers, Section 404(b) of the Sarbanes-Oxley Act requires an external audit of ICFR.

Non-accelerated filers and certain emerging growth companies may be exempt from the external auditor attestation requirement but must still maintain adequate internal controls.

Example: A smaller reporting company may not need a separate ICFR audit, but must still disclose management’s assessment of controls in its 10-K.

1. Organize Documentation: Gather bank statements, payroll records, contracts, and board minutes in a central repository.

2. Address Complex Accounting Areas: For instance, revenue recognition (ASC 606) or lease accounting (ASC 842).

3. Maintain Open Communication: Collaborate with your CPA firm to clarify issues and deadlines.

Example: An OTCQB-listed company will streamline its readiness by reconciling monthly financials and ensuring robust documentation is available for the auditor’s test work.

Audit Requirements: Must adhere to PCAOB standards.

Enhanced Governance: Board structures, audit committees, and internal control documentation are critical.

Ongoing Disclosure: Must meet SEC reporting deadlines and keep investors informed of material events (Forms 8-K, etc.).

Example: A private SaaS firm merging with a SPAC to go public needs PCAOB-audited financial statements and thorough disclosures about intangible assets and revenue recognition.

1. Underestimating Filing Deadlines and Regulatory Complexity: Failing to budget enough time and resources for timely filings.

2. Weak Internal Controls: Leading to inaccurate financials or material weaknesses flagged by auditors.

3. Inadequate Disclosure: Omitting key risk factors, related-party transactions, or other crucial data in offering documents or periodic reports.

Example: A newly public biotech firm might not properly disclose R&D milestones, leading to SEC comments or investor concerns.