The PCAOB recently issued a report on its review of more than 100 audits of SPACs & De-SPACed issuers, and its conclusions weren’t exactly a ringing endorsement of the performance of SPAC auditors. In particular, the report highlighted shortcomings in auditors’ work surrounding the classification of warrants issued by SPACs, which prompted a wave of restatements in 2021. Here’s an excerpt:
We have observed audits of the public company’s year-end financial statements where engagement teams did not:
– Identify and appropriately evaluate a generally accepted accounting principles (GAAP) departure related to:
- Warrants prior to the restatement of the public company’s financial statements, stock compensation, and/or measurement and classification of redeemable shares;
- The omission of certain required fair value measurement disclosures in the public company’s financial statements; or
– Identify the significance to the financial statements of the public company’s error in the presentation and disclosure related to the contract assets from contracts with customers.
The report identifies additional financial statement auditing deficiencies, ICFR auditing deficiencies, and other instances of noncompliance with PCAOB standards or rules.
– John Jenkins