Page 42 - Initial Public Offering - An Introduction to IPO on Wall Street

4.1 What is ‘Going Public’?

The process of collecting the
data needed for the registration
statement, sending it to the
SEC, with all the necessary
details including pricing, to get
your stock listed is what going
public means.

This involves the preparation of
the necessary business,
marketing, and financial details,
as well as the determination of
the optimum tax and legal
system, both of which are
essential steps. The going public process concludes with the sale of the stock and the collection
of the earnings by the company and/or its shareholders.

4.2 What is ‘Being Public’?

The process of getting the company ready to run as a public enterprise is ‘being public’. Many
activities are involved in this process include updating, retaining or improving financial
reporting prowess; developing an investor relations mechanism; and fulfilling the SEC and
chosen exchange’s criteria for regulation, disclosure, corporate governance and listing.

Temporary exemption is given by The JOBS Act to businesses qualifying as EGCs from
Section 404(b) of the Sarbanes-Oxley Act, which relates to the evaluation of internal controls
over financial statements by the independent auditor of the organization. However, the
conditional exception does not extend to reports on internal controls through management
under the Sarbanes-Oxley Act's financial reporting provisions.

4.3 Areas to Evaluate as Part of IPO Readiness Evaluation

In terms of IPO planning, complicated accounting and financial reporting concerns are just a
small part of the problem at hand. The real obstacle is to look through major functions and find
areas that will need to be developed or improved in order to prepare the organization to become
a public entity. The following are the steps involved in assessing the readiness of a business
for IPO across major activities and functions.

4.3.1 Accounting and Financial Reporting

Sarbanes-Oxley forbids the provision of such non-audit services by an external auditor of a
corporation; this includes but is not limited to the provision of valuation, legal and internal
audit services.
There are a range of non-audit services that an auditor can offer, such as general consulting and
tax services. However, the audit board must approve in advance these approved non-audit
services.

Thus, businesses should examine their current relationship with their external audit firm in
order to determine acceptable and prohibited services and create strong autonomy in relation

Page 42