6.1 Introduction

Audited financial statements to be included in the IPO registration statement often will be subject to additional audit procedures because the standards governing audits of public companies are different from those for private companies. Specifically, the financial statement audits performed for a private company and its independent auditor are subject to the auditing standards issued by the AICPA’s Auditing Standards Board; however, audits of financial statements included in a registration statement filed with the SEC need to be performed in accordance with PCAOB standards. Although the auditor may have previously expressed an opinion on the annual financial statements in accordance with AICPA auditing standards (i.e., auditing standards generally accepted in the United States, or “U.S. GAAS”), the auditor will need to issue an auditor’s report on the required annual financial statements in accordance with PCAOB standards for inclusion in the registration statement, or in accordance with both U.S. GAAS and PCAOB standards when the company is submitting its draft registration statement confidentially. Auditors would also issue a report under two sets of standards (i.e., perform an audit in accordance with both U.S. GAAS and PCAOB standards, commonly referred to as a dual-standard report) in other scenarios, such as when a Form 10 is being filed (e.g., when currently outstanding equity securities are registered) or when a private-company predecessor’s financial statements are included in a registration statement. To issue such an auditor’s report, the auditor must be registered with the PCAOB and comply with all relevant PCAOB requirements.