Audit Procedures for a Company That Wants to Go Public

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For many companies, the idea of "going public" is a promising prospect. When a company decides to go public, it transfers ownership of the company to a large group of individuals, each of whom becomes a stock holder. A company that decides to go public will enjoy the prestige and recognition of a publicly traded company, will increase the capital flowing into the company, and will be able to pursue acquisitions and mergers with other similar companies. However, before a stock goes public for the first time, it must be audited to make sure its business practices are secure.

What to Expect

  • When a company goes public, it is called an initial public offering (IPO). When a pre-IPO company begins to make plans to go public, the managers or owners will want to contact an individual who can audit the financials of the business and ensure that everything is in working order. An audit is used to determine whether a company is fit to pursue an IPO. Financial statements, management structure and company holdings are all reviewed during the process. A company will need to demonstrate that all transactions have been completed fairly, that the company has enough capital to pursue going public, and that the shareholders will get a fair deal in the stock of the company.

Diagnostics And Restructuring

  • Often, a company that is financially prepared to move toward an IPO is not structurally or diagnostically prepared. For example, the tax compliance and financial reporting of a publicly traded company may differ from that of a privately owned business, and preparing the process by which earnings and tax reports are reported and released to the public can be difficult. Moreover, because public companies are required to provide disclosure to shareholders, an auditor will ensure that all of the information to which the public is privy can and will be released.

Growth

  • An auditor will often help a company that decides to go public to reshape the vision of the company in a way that will allow investors to get the most out of their holdings. Risk and personnel management are integral to the way a company runs, and an auditor ensures that the company is structured in such a way as to minimize risks and maximize profits while keeping the best possible personnel on staff. The financial performance of the company, which is expected to improve over time, will be reviewed and recommendations made to allow it to remain publicly traded, and healthy, in longevity.

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