Required Audit Reports for Companies in the United States

Why It Matters

The tiered audit mandates dictate disclosure costs and compliance risk for public companies, directly shaping investor confidence and access to capital.

Key Takeaways

• SEC filers must attach audited financial statements to annual 10‑K/20‑F filings.
• Large and accelerated filers need both management and auditor internal‑control reports.
• Non‑accelerated filers only require management’s internal‑control narrative, no auditor opinion.
• Newly public companies are exempt from 404A/404B for their first 10‑K.
• Audits shift to integrated opinions once a company files its second 10‑K.

Summary

The video explains audit reporting requirements for U.S. companies, distinguishing SEC‑reporting entities from private firms, and outlines the filing obligations under the Securities Exchange Act and Sarbanes‑Oxley.

SEC filers must include audited income statement, balance sheet, and cash‑flow statement in their 10‑K or 20‑F. Large accelerated and accelerated filers must also provide management’s internal‑control report (Section 404A) and an auditor’s opinion on those controls (Section 404B). Non‑accelerated filers only need management’s narrative; the auditor’s control opinion is optional. Smaller reporting companies, emerging growth companies, and newly public firms enjoy further exemptions.

The presenter illustrates the rules with Instacart’s filings. Its first 10‑K (March 5 2024) contained a single auditor opinion on the financial statements, reflecting the newly public exemption. By the second 10‑K (Feb 28 2025), PwC issued dual opinions and referenced management’s internal‑control report, demonstrating the transition to integrated audit requirements.

Understanding these thresholds is critical for CFOs, auditors, and investors, as non‑compliance can trigger SEC enforcement and affect capital‑raising. The tiered framework also influences audit‑firm planning and cost structures for companies transitioning from private to public status.

Original Description

SEC reporting companies (companies required to file an annual report per the Securities Exchange Act of 1934) are required to disclose audited financial statements in their annual report. SEC reporting companies are also subject to Section 404(a) and Section 404(b) of the Sarbanes Oxley Act, which require the company's management to report on the effectiveness of internal controls (404a) and for the independent auditor to report on the effectiveness of the internal controls (404b).

Certain SEC reporting companies are exempt from Section 404(b). These companies include non-accelerated filers, companies that qualify as a Smaller Reporting Company an have annual revenue less than $100 million, and Emerging Growth Companies. Also, "newly public" companies are exempt from both Section 404(a) and Section 404(b). A company is considered "newly public" until the filing of its second annual report (the second 10-K filing for a domestic company and the second 20-F or 40-F filing for foreign private issuers).

Private companies generally aren't required to file audited financial statements, although they may choose to file audited financial statements if they are seeking a bank loan and the lender requests this, if they are attempting to go public and are filing an S-1 registration statement, etc.

—

Edspira is the creation of Michael McLaughlin, an award-winning professor who went from teenage homelessness to a PhD. Edspira’s mission is to make a high-quality business education freely available to the world.

—

SUBSCRIBE FOR A FREE 53-PAGE GUIDE TO THE FINANCIAL STATEMENTS, PLUS:

• A 23-PAGE GUIDE TO MANAGERIAL ACCOUNTING

• A 44-PAGE GUIDE TO U.S. TAXATION

• A 75-PAGE GUIDE TO FINANCIAL STATEMENT ANALYSIS

• MANY MORE FREE PDF GUIDES AND SPREADSHEETS

* http://eepurl.com/dIaa5z

—

SUPPORT EDSPIRA ON PATREON

*https://www.patreon.com/prof_mclaughlin

—

GET CERTIFIED IN FINANCIAL STATEMENT ANALYSIS, IFRS 16, AND ASSET-LIABILITY MANAGEMENT

* https://edspira.thinkific.com

—

LISTEN TO THE SCHEME PODCAST

* Apple Podcasts: https://podcasts.apple.com/us/podcast/scheme/id1522352725

* Spotify: https://open.spotify.com/show/4WaNTqVFxISHlgcSWNT1kc

* Website: https://www.edspira.com/podcast-2/

—

GET TAX TIPS ON TIKTOK

* https://www.tiktok.com/@prof_mclaughlin

—

ACCESS INDEX OF VIDEOS

* https://www.edspira.com/index

—

CONNECT WITH EDSPIRA

* Facebook: https://www.facebook.com/Edspira

* Instagram: https://www.instagram.com/edspiradotcom

* LinkedIn: https://www.linkedin.com/company/edspira

—

CONNECT WITH MICHAEL

* Twitter: https://www.twitter.com/Prof_McLaughlin

* LinkedIn: https://www.linkedin.com/in/prof-michael-mclaughlin

—

ABOUT EDSPIRA AND ITS CREATOR

* https://www.edspira.com/about/

* https://michaelmclaughlin.com