Answer:
There are several differences between the audit report of a public company and a non-public company.
➽ Here are four key differences:
- Reporting Requirements: Public companies are subject to more stringent reporting requirements due to their status as publicly traded entities. They are required to comply with specific accounting standards (e.g., Generally Accepted Accounting Principles or International Financial Reporting Standards) and provide more detailed financial information in their audit reports. Non-public companies may have more flexibility in reporting requirements and can use other accounting frameworks such as the modified cash basis or income tax basis.
- Transparency and Disclosure: Public companies are obligated to disclosure more information to the public and regulators. Their audit reports typically include additional disclosures, such as management's discussion and analysis, risk factors, and other financial statements. Non-public companies may have less disclosure requirements and may not be obligated to provide the same level of detail in their audit reports.
- Regulatory Oversight: Public companies are subject to more regulatory oversight and scrutiny from entities such as the Securities and Exchange Commission (SEC) in the United States. The audit of public companies is often subject to additional regulatory requirements, including periodic inspections by regulatory bodies. Non-public companies, on the other hand, may have fewer regulatory obligations and less external oversight.
- User Base: The user base of audit reports for public companies is typically broader, including shareholders, investors, regulators, analysts, and the general public. The audit report of a public company plays a significant role in providing assurance and maintaining the confidence of stakeholders in the company's financial statements. Non-public companies, which are privately held, may have a narrower user base, including owners, lenders, and specific stakeholders.