Page 72 - Initial Public Offering - An Introduction to IPO on Wall Street

The scale of the national and global resources of the business and its expertise in the sector of
the company are other considerations to remember. The main services that will be given by
the independent auditor include:

 Strategic recommendations to assist in drawing up a practical strategy to access the
capital markets;
 Advising the corporation in the preparation of a registration statement in accordance with
the provisions of the US GAAP and SEC;
 Guidance on recognizing possibly sensitive or questionable accounting problems (e.g.
cheap stock criteria, recognition of revenue), problems in financial disclosure and overall
financial reporting transparency;
 Financial statement audits. The process of auditing several years of financial statements
and associated public offering disclosure standards can be lengthy. An existing
relationship with an auditor who understands the business of the organization well,
combined with thorough planning on the part of the company, should allow the process to
be completed quicker and more efficiently, which can be vital to the success of the offer;
 A letter of comfort to aid the underwriter in his due diligence activities. This letter
specifies such processes carried out by the external auditor of the business at the behest of
the underwriter, together with other comments made by the auditor in relation to the
financial declarations or other details found in the brochure; and
 A prospectus analysis and guidance in answering SEC comment letters.

It is not possible to exaggerate the value of involving trained, independent auditors well before
the IPO, especially if a business has never had its financial reports audited before. The first
audit of many relatively new and developing businesses also shows issues with accounting and
financial statements that need to be fixed before the registration statement can be submitted.

Large accounting firms are usually organized as full-service specialist firms, providing services
across different business lines (e.g. audit, payroll, consultancy, and advisory services for human
resources). Independent auditors of a corporation, as well as people from these other business
areas, before, throughout and after the public process, may play a vital role in a similar way to
advisors.

Some of these functions include determining whether the best option for a corporation is to go
public, determining effective incentive programs, discussing the needs and capacities of the
financial system of an organization, evaluating the terms and conditions of purchases and tax
planning. A business can also consider hiring an accounting company that, as defined in the
following section, can provide consulting services related to financial reporting and IPO.

4.4.8 Advisory Accountant

Businesses frequently pursue transaction assistance and consulting services from a second
accounting company that is not bound by the requirements of auditor independence.

By offering an analytical view of the crucial issues associated with accessing a specific capital
market, a consultant accountant may give guidance and help to organizations with limited
background in IPOs. An advisory accountant will help a business go through a capital-raising
transaction in the following manner:

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