There are an increasing number of opportunities for nonpublic entities to raise funds; for example, crowdfunding, private placement offerings, franchise offerings, issuing municipal securities, or even issuing digital currency. The related offering documents may not be SEC regulated, as they are exempt from the Securities Act of 1933. Yet, they often contain or reference audited financial statements. Even public offerings of securities that do not exceed $5 million in any one-year period (called Regulation A offerings) are considered exempt offerings.
The Auditing Standards Board found it appropriate to clarify an auditor’s responsibility when associated with exempt offerings, which may include predecessor auditors of former clients. SAS No. 133, Auditor Involvement with Exempt Offering Documents, does not amend or supersede any previously existing guidance. However, it satisfies several needs, including defining when an auditor is “involved” with an exempt offering, requiring compliance with SAS No. 133.
An auditor’s responsibilities include the following:
- Reading the exempt offering document.
- Considering whether any information included or incorporated by reference in the offering document could undermine the credibility of the financial statements and the related auditor’s report.
- Determining that the auditor’s role is not described in the offering document in a way that indicates that the auditor’s responsibility is greater than the auditor intends.
- Performing procedures to identify subsequent events and facts occurring between the date of the auditor’s report and the date of distribution, circulation, or submission of the offering document that may have caused revision to the auditor’s report had the information been known at the time.
- Obtaining an updated written management representation letter.
SAS No. 133 is effective for exempt offering documents that are initially distributed, circulated, or submitted on or after June 15, 2018.
ABOUT THE AUTHOR
Jennifer Louis has over 25 years of experience in designing and instructing high-quality training programs in a wide variety of technical and “soft-skills” topics needed for professional and organization success. In 2003, she founded Emergent Solutions Group, LLC, where she focuses her energy on designing and delivering practical and engaging accounting and auditing training. Jennifer started her career in Audit for Deloitte & Touche LLP. Jennifer graduated summa cum laude from Marymount University with a B.B.A. in Accounting