When is auditor consent required

Audit and assurance alert: Auditor's consent in connection with a designated document Learn about the recently revised Section , addressing the auditor's responsibilities when responding to requests to consent to the use of the auditor's report in connection with designated documents.

Get your downloadable electronic copy. Download Now. Commodity tax symposium Mastering money virtual conference On-demand. Conference for audit committees This requirement is derived from Section 7 of the Securities Act which states in part that:. For instance, the consent requirements must be considered when an audit report is included in a new or amended registration statement filed under the Securities Act.

Consider the following example:. Facts : Company A, a private company, is preparing to file a registration statement on Form S-1 for its initial public offering of common stock. The consent will be filed as Exhibit See SEC Company B's Form K includes its financial statements as of December 31, and and for each of the three years in the period ended December 31, together with an audit report on those financial statements. If an Exchange Act report includes or incorporates by reference an audit report, then a consent would generally need to be filed as an exhibit to the Exchange Act filing if that filing is automatically incorporated by reference into a previously filed Securities Act registration statement.

When Company C files its Form K for the year ended December 31, , it will include an audit report on Company C's financial statements as of December 31, and and for each of the three years in the period ended December 31, If Company C had not previously filed a Securities Act registration statement into which its Form K would be automatically incorporated when filed, then no auditor's consent would be required at the time the Form K is filed.

The form of a consent will depend on a number of factors, including but not limited to :. US Template Manager contains examples of consents, as well as considerations for determining which form of consent is appropriate in a given fact pattern. However, see SEC The auditor shall manually sign the consent, or other document, acknowledging his or her signature that appears in the typed form on the consent within the electronic filing such manually signed consent or other document shall be retained by the electronic filer for five years.

The firm believes the date that authorization was provided to the registrant should be documented in a transmittal letter. US Template Manager contains an example of an illustrative transmittal letter under "Edgar filing authorization. The consent is usually dated as of or within a few days of filing the registration statement. The date of the consent should not be after the date through which subsequent events have been evaluated.

Typically, the consent date would coincide with the completion of our "keeping current" procedures, which should be performed as described in PwC Audit The consent date must be as of the current date, as such, there will be situations where the consent date will not necessarily align with the audit opinion date e. Additionally, a new consent is required in connection with an amendment:. Securities Act Rule b reprinted at SEC allows a consent to be incorporated by reference into a registration statement filed pursuant to Securities Act Rule b from a previously filed registration statement relating to that offering provided that the consent contained in the previously filed registration statement expressly provides for such incorporation.

Accordingly, the registrant would need to ask us to provide a new consent in connection with a registration statement filed pursuant to Rule b. We understand that some law firms advise their clients to include provisions in the engagement letter to the effect that, in the event the client-auditor relationship is terminated, the auditor would agree to consent to the continued use of its report in filings after termination.

In some cases, attorneys have proposed to include language to the effect that the agreement is subject to the auditor completing its professional responsibilities. As described in PwC Audit , "As a general rule, because of various circumstances and events that could occur in the future that we are unable to predict at the time an audit relationship ceases to exist, we should not make any commitment as to future services we will provide related to our previous audits.

One reason for this position is that any contractual commitment to undertake future services may be deemed to be an independence conflict at the time the commitment is made. An engagement to reissue an audit report and issue a consent is a new engagement. The auditor is not required to reissue or to consent to the use of its previous audit reports and it may decide not to do so, even if it has not withdrawn the report.

PCAOB Quality Control standards require the auditor to undertake an acceptance review before it can agree to such an engagement. Professional auditing standards require the auditor to perform certain keeping current procedures before it can agree to issue a consent.

If an independent registered public accounting firm was independent when its report was initially issued, it may re-sign the report, or sign a currently dated consent, even if the firm would not be considered independent at that later date provided that no "post-audit work" is performed.

The independent registered public accounting firm would need to be independent in order to "dual date" its audit report. This is normally accomplished by adding an additional sentence to the standard form of consent similar to the following:. We also consent to the reference to us under the heading "Experts" in such Registration Statement.

As discussed in SEC In this fact pattern, the last line in the consent should be revised to state:. We also consent to the reference to us as experts under the heading "Independent Registered Public Accounting Firm" in such Registration Statement. This formulation is intended to make it clear that the auditor is an expert only with respect to its audit report and not with respect to its review report on interim financial statements. Rule is not limited to auditors.

Rule outlines the requirements for a written consent of any third-party expert referenced in a filing included or incorporated by reference in a Securities Act registration statement. The SEC staff has provided interpretive guidance relating to certain situations in which the consent of a third party other than an auditor might be required in Securities Act Rules Compliance and Disclosure Interpretations Registrants should consider consulting with their legal counsel to determine whether a third party consent is required.

In rare circumstances, such as situations involving hostile takeover attempts, the SEC may waive the requirement for a registrant to provide a consent. In these cases, the registrant must apply for the waiver and provide an affidavit complying with Securities Act Rule reprinted at SEC Securities Act Rule reprinted at SEC requires, in most circumstances, the filing of a written consent to the use of an audit report which is incorporated by reference in a Securities Act registration statement e.

These circumstances include situations in which:. Since the standard form of consent does not require any expression of opinion, it is not necessary to address the consent as in the case of a report on financial statements.

There is no need to refer to opinion qualifications, explanatory paragraphs or references to other auditors in the consent. When the auditor has been engaged to report on modifications to financial statements previously audited by a predecessor auditor, the consent does not need to be modified i.

The standard consent should also be used in situations in which the auditor is the predecessor auditor and reissues its report on pre-modification financial statements. In certain limited situations, the SEC staff will permit a preliminary filing to include financial statements which reflect a future corporate event or transaction e. By allowing the registrant to file historical financial statements reflecting the transaction before it happens, the SEC staff can streamline its review process.

See section 4. When the audit report is dual dated, the consent should refer to all dates and related explanation s appearing in the date block of the report exactly as they appear in the report e.

The preceding example assumes an integrated audit. Post-effective amendments PEAs may be identified by amendment number rather than by form number if there is a need to clearly identify the document for example, when more than one PEA on Form S-8 is being filed at the same time.

However, this more detailed level of identification is not required. The SEC requires any S-X Article 12 financial statement schedules to be audited when the financial statements to which they relate are audited. The audit report on the primary financial statements will include a reference to the financial statement schedules or, alternatively, there will be a separate audit report relating to the financial statement schedules.

Item 3 of Form S-8 and Item 12 of Form S-3 require registrants to incorporate by reference their most recent annual report on Form K filed pursuant to Section 13 a or 15 d of the Exchange Act , and all Exchange Act reports e. Accordingly, many Form S-8 and Form S-3 registration statements are "evergreen" in that the offering is continuously updated by each subsequently filed Exchange Act report.

Any subsequently required consents may be included in the material that is subsequently filed e. It should be clearly understood that including a Form S-8 or Form S-3 consent in a Form K is appropriate only in the circumstance of a continuous offering. It is not to be used when a Form S-8 or Form S-3 is not yet filed or is no longer effective. See PwC Audit regarding the need to perform "keeping current" procedures.

The filing of a prospectus supplement does not result in a new effective date for the auditor, and therefore would not require the filing of a consent, unless the prospectus supplement includes new audited financial statements such as restated financial statements, financial statements required by S-X or as to which the accountant is an expert. In this case, the new consent would be included in a post-effective amendment to the registration statement, or by filing an Exchange Act report such as a Form K or Form 8-K.

That transmittal letter may not be included within the prospectus supplement. Certain employee benefit plans which register interests in the plan on Form S-8 see SEC are required to file periodic reports on Form K which are incorporated by reference in Form S In that case, the Section 7 consent requirement would apply to the FWP as well.

How about things like Rule communications? Generally yes as a matter of contract, though not as a matter of law. It depends whether the company has an effective Securities Act registration statement for which the Form K will act as a Section 10 a 3 update.

If so, you would need a consent. Otherwise, no consent is needed. See FRM Item For a foreign private issuer filing a Form F as an Exchange Act registration statement i. For my public company exchange offer on Form S-4, can I simply incorporate by reference from the consent filed with the K? The SEC Staff takes the position that Regulation S-K Item b 23 does not permit incorporation from a consent filed with an Exchange Act report into a Securities Act registration statement that becomes effective after the Exchange Act report was filed.

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