Securities Lawyer's Deskbook
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Accounting Rules
Form and Content of Financial Statements

Regulation S-X

Rule 2-07 -- Communication with Audit Committees

  1. Each registered public accounting firm that performs for an audit client that is an issuer (as defined in section 10A(f) of the Securities Exchange Act of 1934, other than an issuer that is an Asset-Backed Issuer as defined in Section 229.1101, or an investment company registered under section 8 of the Investment Company Act of 1940, other than a unit investment trust as defined by section 4(2) of the Investment Company Act of 1940, any audit required under the securities laws shall report, prior to the filing of such audit report with the Commission (or in the case of a registered investment company, annually, and if the annual communication is not within 90 days prior to the filing, provide an update, in the 90 day period prior to the filing, of any changes to the previously reported information), to the audit committee of the issuer or registered investment company:

    1. All critical accounting policies and practices to be used;

    2. All alternative treatments within Generally Accepted Accounting Principles for policies and practices related to material items that have been discussed with management of the issuer or registered investment company, including:

      1. Ramifications of the use of such alternative disclosures and treatments; and

      2. The treatment preferred by the registered public accounting firm;

    3. Other material written communications between the registered public accounting firm and the management of the issuer or registered investment company, such as any management letter or schedule of unadjusted differences;

    4. If the audit client is an investment company, all non-audit services provided to any entity in an investment company complex, as defined in Rule 2-01 (f)(14), that were not pre-approved by the registered investment company's audit committee pursuant to Rule 2-01 (c)(7).

  2. [Reserved]

Regulatory History

68 FR 6006, 6048, Feb. 5, 2003; 70 FR 1506, 1593, Jan. 7, 2005.

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