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Refer to Q&A: Small Business and SEC
for types of offerings that are exempt from SEC registration. See http://www.sec.gov/info/smallbus/qasbsec.htm
. The most common exemptions from the registration requirements include private offerings to a limited number of persons or institutions (the JOBS Act recently increased this number to 2,000 accredited investors or 400 unaccredited investors); initial public offerings of limited size (the JOBS Act recently increased this amount to $50 million); intrastate offerings; and securities of municipal, state, and federal governments. Refer to state securities commission website for state specific securities registration, notification, and exemption requirements (see http://www.seclinks.com/id16.html
for website links).
2 Note: Whether the auditor owes a duty to a non-client third party is typically decided by state statutes and case law decisions. Case law or legislation that renders CPAs liable for negligence to large numbers of third persons has dramatically increased the number of suits and the potential liability of CPAs.
3 Rule 10b-5 of the Securities Exchange Act of 1934 requires disclosure of all material facts and prohibits the omission of facts necessary to make statements not misleading, making it unlawful to employ any device, scheme or artifice to defraud another person in a securities transaction. In addition to federal securities statutes, each state has its own securities laws and rules, referred to as "Blue Sky" laws, which contain similar anti-fraud provisions to provide private action for investors who have been injured by securities fraud.
4 See AU §550, Other Information in Documents Containing Audited Financial Statements, regarding the auditor's responsibility in relation to other information in documents containing audited financial statements and the auditor's report thereon.
5 Refer to AU §711, Filings Under Federal Securities Statutes, and AU §9711, Auditing Interpretation of Section 711, for subsequent event procedures related to the 1933 Act Filings.
6 Refer to AU §560, Subsequent Events and AU §561, Subsequent Discovery of Facts Existing at the Date of the Auditor's Report, for procedures to be followed by the auditor upon discovery of facts subsequent to the date of the audit report that may have affected the financial statements on which the auditor previously reported.
6 Refer to Prospective Financial Information – AICPA Auditing and Accounting Guide, for the appropriate disclaimer language. The Safe Harbor for forward-looking statements provided by the Private Securities Litigation Reform Act of 1995 does not apply in many situations such as initial public offerings. Therefore, appropriate language should be included in the consent to notify users that the firm is not associated with the forward-looking statements or prospective financial information.
7 PCAOB Rule 1001(i)(iii) defines the term "issuer" to include any public company, regardless of the jurisdiction of its organization or operation, that is required to file reports with the SEC or that has filed a registration statement for a public offering of securities.
8 The requirements of "substantial role" are described in PCAOB Rule 1001 (p)(i).