SEC / Public Company Audit
Service description
A PCAOB-regulated audit is the independent examination of financial statements that a public company, or one preparing to go public, must file with the SEC. It's performed under PCAOB auditing standards, rather than the standards that govern a private-company audit, by a firm registered with and inspected by the PCAOB.
Common industries
Publicly traded companies, or ones preparing for an IPO, across every industry the SEC regulates.
ROI
A prerequisite for public-market access — high value, but a sticky, heavily-regulated relationship more than a shopped engagement.
Benefit
The PCAOB-regulated audit a public (or going-public) company requires for its SEC filings.
Why get it
Federal securities law requires audited financial statements from public companies, performed under PCAOB standards by a PCAOB-registered firm — a private-company audit firm and standard don't satisfy the requirement.
When you benefit
Annual, tied to the company's fiscal year-end and its Form 10-K filing deadline, with quarterly reviews of interim financial statements in between.
What it costs
Substantial, scoped to the company's size and complexity — typically the largest audit fee a company pays.
When you pay
Commonly billed across the engagement's phases — planning, interim fieldwork, and year-end fieldwork and reporting — with the final invoice tied to issuance of the audit opinion.
Other costs
Remediating a material weakness the audit identifies, or responding to a PCAOB inspection finding, can add cost well beyond the audit fee itself.
Risks to know
A qualified opinion, a going-concern qualification, or a PCAOB inspection finding against the engagement can each unsettle investors and complicate the company's next filing. Independence rules also restrict which other services the same firm can provide.
When risks arise
Most issues surface during fieldwork or a later PCAOB inspection of the engagement, which can occur well after the opinion is issued and draw scrutiny to that year's audit specifically.
The process
The auditor plans the integrated audit of the financial statements and internal control over financial reporting, performs fieldwork and control testing, and reviews the draft filing with management and the audit committee before issuing its opinion for the company's SEC filing.
Your commitment
The company gives the auditor full access to its accounting records, internal control documentation, and staff, and its audit committee oversees the engagement, approves non-audit services in advance, and reviews findings directly with the auditor.
Documents to gather
- Prior-year audited financial statements and PCAOB inspection history, if any
- Internal control documentation and walkthroughs
- Board and audit committee minutes
- Draft SEC filing (10-K or registration statement) the audit will support
Helpful reading
- All About Auditors: What Investors Need to Know — U.S. Securities and Exchange Commission
- PCAOB inspectors offer advice in areas of risk — Journal of Accountancy
Further research
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