In 2019, there were 1,951 public companies that opted to file with the SEC with a dual filer status, or 32.6% of companies included in our Who Audits Public Companies – 2020 Edition analysis. These statuses include:
- Large Accelerated Filer + Smaller Reporting Company
- Accelerated Filer + Smaller Reporting Company
- Non-Accelerated Filer + Smaller Reporting Company
Filer status is important to evaluate, as different filer types have different reporting obligations and securities disclosures from one another, including filing deadlines and responsibilities for internal control over financial reporting (ICFR). In general, Smaller Reporting Companies are permitted to provide less robust narrative disclosures, particularly in regards to executive compensation, and are only required to provide two fiscal years of audited financial statements, as opposed to three.
For a company to qualify as a Smaller Reporting Company, generally the requirements are:
- Public float less than $250 million or
- Less than $100 million in annual revenues and
– No public float or
– Public float less than $700 million
How registrants choose to identify their filing status has been changing following amendments to SEC reporting requirements. The new amendments expand the number of registrants that can utilize scaled-down disclosure requirements applicable to Smaller Reporting Companies. However, the amendments did not change the Accelerated Filer threshold.
What this means, for example, is if a company’s market value of a publicly-traded stock is more than $250 million but less than $700 million and has annual revenues less than $100 million, the company could file as both an Accelerated Filer and a Smaller Reporting Company, requiring more accelerated filing deadlines and needing an auditor attestation of ICFR.
There were 180 audit firms competing for the market share of dual-status filers in 2019; the top 20 firms audit 1,322 of 1,951 companies – or 67.8% – of all dual-status registrants in 2019.
Note: Two registrants that identified as Large Accelerated Filer + Smaller Reporting Company in 2020 are included in the total count, but not represented in the above graphic.
Accelerated Filer + Smaller Reporting Company
If a Smaller Reporting Company has a public float of more than $75 million, it qualifies as an Accelerated Filer. Accelerated Filers must provide an auditor’s attestation of management’s assessment of ICFR, as required under Sarbanes-Oxley Act Section 404(b) and generally have to adhere to an accelerated timeframe when filing their periodic reports.
Of the 741 total public companies that identified as an Accelerated Filer + Smaller Reporting Company in 2019, the Big Four audited 274 companies, or 37.0%. The remaining 63.0% of companies in this population are audited by 84 firms, with 42 firms auditing only one company with this dual filer status in 2019.
Non-Accelerated Filer + Smaller Reporting Company
If a Smaller Reporting Company has no public float or a public float of less than $75 million, it may qualify as a Non-Accelerated Filer. Non-Accelerated Filers do not have to provide an auditor’s attestation of management’s assessment of ICFR, and generally have more time to file their periodic reports.
Of the 1,208 total public companies that identified as Non-Accelerated Filer + Smaller Reporting Company in 2019, the Big Four audited 159 companies, or 13.2%.
Together, Marcum and MaloneBailey audit 15.8% of this population. However, the market share among Non-Accelerated Filers + Smaller Reporting Companies is diverse. Slightly over 60% of companies were audited by 152 different firms, with 64 firms auditing only one company with this dual filer status in 2019.
Large Accelerated Filers + Smaller Reporting Company
There were two companies in 2019 that identified as both a Large Accelerated Filer + Smaller Reporting Company: Dicerna Pharmaceuticals Inc. [Nasdaq: DRNA], audited by Deloitte, and Myovant Sciences Ltd. [NYSE: MYOV], audited by EY.
When looking at the top firms that audit dual-status companies by percentage of total firm audits (including all filer statuses), some audit firms have a heavy concentration of dual-status clients. Audits of dual-status public companies make up less than 20% of total audits performed by the Big Four.
In 2019, 42 firms exclusively audited dual-status companies, comprising 100% of their public company audits for 2019, which are excluded from the table of top ten firms:
Looking at firms just outside of the top ten that have audited more than 50 dual filer status registrants, Marcum audited 164 public companies with a dual-status, comprising 77.0% of their total firm audits, while MaloneBailey audited 69, comprising 77.5% of their total public company audits in 2019.
For more information on this analysis, please contact us.
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