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Consultation with the SEC or AICPA

From time to time, an issue will not be covered directly by actual authoritative literature. As a result of our technical research, we will document all related guidance, and take a position on behalf of the company. Most times the auditors agree with us.

But sometimes either the auditors don’t agree, or the issue is of such magnitude that it is not feasible to “just go with it.” An example might be a question as to which company to present as the parent, and which one is the subsidiary. If we get it wrong, the whole audit and financial statements would be for the wrong company altogether.

In these cases, we get guidance directly from the AICPA, if the company is private, or the SEC if the company is public or going public.

When consulting with the AICPA, a phone call normally suffices. Sometimes, though, we will send our technical memo to them to allow them the opportunity to see all the facts and understand our position. They provide us with their position on the matter, and we incorporate that into our final stand.

With the SEC, a phone call is also the first step. However, for more important matters, we prepare a detailed pre-clearance letter to submit to them for a written position. The pre-clearance letter follows a specific format provided by the SEC. Typically, when they have reviewed the submission, they set up a call when they can ask questions of us and company management. In about three to four weeks after the initial submission, they send a formal letter stating their position on our specific fact pattern.

We then incorporate their position into our technical memo, and prepare the company’s final position.