The Center for Audit Quality recently released Alert 2021-01, Auditor and Audit Committee Considerations Relating to Special Purpose Acquisition Company (SPAC) Initial Public Offerings and Mergers. This Alert discusses the five phases in the life cycle of a SPAC and some of the unique risks and challenges of a private company entering the public markets through a merger with a SPAC.
Audit committees of private companies determining whether to “go public” via a SPAC transaction should consider the following matters:
- Public-company readiness
- The track record of SPAC leadership in completing a SPAC transaction
- The skillset, experience and independence of board members
- Accounting, reporting and disclosure issues
- The experience and independence of the external auditor
Likewise, auditors have much to consider related to SPAC merger transactions, including matters related to client acceptance, auditor reporting under both PCAOB and AICPA standards, the appropriate classification of warrants issued by the SPAC, and factors that could heighten fraud risk.
For further financial-reporting and audit considerations related to SPAC transactions, see the following RSM articles: