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.
Adopting public-entity U.S. GAAP and providing SEC-required disclosures do not
constitute the correction of an accounting error under ASC 250. Therefore, financial
statements that are revised to meet public-company requirements are not considered
“restated.” However, if an error is identified in previously issued financial
statements and corrected as part of an IPO, the disclosure requirements in ASC 250
should be considered. See Section
3.7 for additional discussion of the correction of errors and related
considerations associated with internal controls.