Deciding to list your company as a publicly traded company is a critical decision, and it comes with procedures you must follow to ensure you’re meeting compliance regulations and requirements. One of those requirements is a type of public company audit known as an IPO audit.
In this post, we’ll define an IPO audit and explain how it is different from private company audits—that way, you can be sure you’re on the right track to opening your company up to public investors.
What is an IPO Audit?
A company must undergo an initial public offering (IPO) audit before its initial public offering. This specialized audit offers a comprehensive overview of a company’s financial position. Because it provides a high level of assurance, your investors and the public can rest assured that your company’s operations follow guidelines set forth by the Securities and Exchange Commission (SEC).
Typically, an IPO audit occurs in the preparation stages of the IPO process. Before you begin your S-1 filing, you must review your internal controls, organize your files, and check in with your investors and advisors. Once that’s done, your next step is to hire an audit firm to conduct your audit.
Similarities and Differences Between IPO Audits and General Financial Statement Audits
You may be familiar with general financial statement audits, similar to IPO audits. Both audit types provide an accurate overview of a company’s financial health, including a review of income statements, cash flow statements, and balance sheets. They also follow the guidelines of Generally Accepted Accounting Principles.
IPO audits, though, require a more detailed examination of a company’s operations. Here are three key differences between these two types of audits.
3 Key Differences Between IPO Audits & General Private Company Audits
1. Timelines
Private companies often follow the same schedule each fiscal year. Because audits occur during the same timeframe each year, you can better plan for your audit.
Deciding to open your company to public investing can happen at any point during the fiscal year. This means your IPO audit will take place outside of your regularly scheduled timeframe. Although an IPO audit is comprehensive, it generally follows a quicker timeline than routine private company audits.
2. Public Market Readiness
An initial public offering audit looks further than financial statements. Instead, your auditing team will also determine your company’s readiness to meet a publicly traded company’s regulatory requirements and expectations. An audit will help answer the question: is this company ready to follow strict SEC guidelines?
3. Disclosure Requirements
Filing as a publicly traded company means your company will need to adhere to stricter disclosure requirements at a more frequent interval than what you’re accustomed to following. This may mean you’ll need to provide financial statements quarterly instead of yearly or disclose other pertinent information, like pending lawsuits or major contracts. An IPO audit will cover these requirements.
Audit Services with Assurance Dimensions
At Assurance Dimensions, we have many years of experience preparing private company and PCAOB audits. And the best part? Our secure cloud-based software makes meeting and conducting your audit even easier. Contact us today to learn more about our audit and assurance services.
