3.1 Introduction

Certain provisions of U.S. GAAP for public entities differ from those for nonpublic entities. Further, public entities are subject to various SEC rules and regulations that may affect the financial statements and related disclosures (e.g., the additional disclosure requirements of Regulation S-X). Therefore, a nonpublic entity’s previously issued financial statements are generally not sufficient for an IPO and the financial statements will typically need to be revised for all periods presented to reflect the public-entity accounting principles and additional SEC disclosure requirements. In addition, audits for a private company are subject to the auditing standards issued by the AICPA’s Auditing Standards Board; however, for an IPO, the audit of the issuer must be performed in accordance with PCAOB auditing standards. Therefore, the auditor will need to perform additional procedures and issue a new auditor’s report that refers to PCAOB standards. In a filing submitted for confidential or nonpublic review, the auditor’s report will typically refer to both AICPA and PCAOB auditing standards, as described in Section 6.7.1. See Chapter 6 for discussion of audit considerations under a PCAOB audit compared with an AICPA audit.