January 16, 2014
Preliminary inquiries at accounting firms providing auditing services revealed a high degree of concern regarding liability of the auditor under any Title III crowd funded offering. The impression we received from potential auditors was the liability issue far outweighed the fact that the company to be audited was a start-up, with no revenue and very few, small transactions.
A start-up business with no revenue to date, and raising capital for the first time, will find it difficult, if not impossible, to fund the cost of an audit associated with an offering of its shares under Title III of the JOBSAct.
Basing the requirement on an audit on the amount of capital raised seems contradictory to the very notion of providing capital to start-up business of this nature. They are the very business that need capital the most, and are denied access to the markets by this (the audit requirement) and similar barriers.
I strongly urge the Commission to reconsider the audit requirement criteria for offerings made pursuant to Title III of the JOBSAct.
Specifically, we ask the Commission to exempt companies with $0 (zero) revenue and less than $25k of capital and expense transactions from any certified audit requirement, regardless of the offering amount.