The reporting accountant plays a different role than the company’s existing auditors, but can be (and often is) a separate team in the same firm.
The terms of their engagement and the scope and purpose of their work are usually set out in a detailed engagement letter. The accountants' role will depend on the market practice and the applicable rules in each jurisdiction. However, their main task is to carry out the financial due diligence of the company. This review covers a wide range of areas including historical trading information, projected working capital, profit forecasts and internal management, and accounting systems and control.
Once the prospectus or offering circular has been completed, the accountants typically issue certain private comfort letters for the benefit of the company and/or the investment bank/Listing Sponsor. These comfort letters demonstrate that the accountants are not aware of any significant deterioration in the company's financial or trading position. They also confirm that all financial data in the prospectus or offering circular has been correctly extracted from the company's accounts.
The company's financial accounts might not necessarily comply with the content requirements for the prospectus or offering circular: for example, they are stated in local GAAP rather than IFRS, or the company to be listed is a division of a larger existing company. If so, the accountants will assist the company in drawing up the required additional accounts. In any event, the accountants' review will assist all parties in ensuring that the financial information included in the prospectus or offering circular is correct and not misleading. The reporting accountant may also advise on the tax implications of the flotation; however, the company may prefer to appoint separate tax specialists to do this.