The Dude is busy unraveling a case of mistaken identity – but after his introduction to consents he also is taking time to gather more information about them.
I’m working on a shelf takedown.Do I need an auditor’s consent?

Generally no. Unlike a post-effective amendment (or PE), a prospectus supplement does not establish a new effective date for the auditor or other experts. Getting to that conclusion involves understanding Rule 430B(f), and in particular paragraph (f)(5) of that rule, whose twists and turns would challenge the talents of even a skilled amateur detective such as The Dude.

Often, the auditor’s comfort procedures in connection with a takedown will entail coordination, timing and logistics that are similar to their consent procedures – for example, the auditors will review the filing, the issuer’s management will update their representations letters to the auditors, and the issuer’s counsel will provide attorney response letters to auditor requests regarding loss contingencies – so the timing and mechanics will probably resemble a consent situation.

Legally, though, it’s a different scenario, and here’s how it works. Under Rule 430B(f)(5), a prospectus supplement filed under Rule 424(b) will not establish a new effective date for the auditor unless the prospectus “contains new audited financial statements or other financial information as to which the accountant is an expert.” The first category – “new audited financial statements” – is clear enough. Note that the consent requirement will be triggered whether your prospectus supplement actually includes the new audited financial statements or simply incorporates them by reference from a 10-K or other Exchange Act report, as Release No. 33-8591 (Offering Reform) makes clear (see p. 208).

So, what falls into the bucket of “other financial information as to which the accountant is an expert?” The Offering Reform release gives some examples (see note 470):

• A restatement of the issuer’s financial statements filed after the date of the last consent;
  The filing of acquired company financial statements under S-X Rule 3-05; and
• The filing of financial statements of operating real estate property under S-X Rule 3-14.

In addition, a new consent is required when the accountant’s internal control attestation under SOX 404(b) is changed. In other words, if a public company’s auditor changes its view of management’s assessment of internal control over financial reporting, a new consent would thereafter be required.
How would I add a consent in case I need one for my prospectus supplement?

Under Rule 439, where a consent is required, it must be filed as an exhibit to the registration statement. Frequently, issuers do this using a Form 8-K (or other incorporated Exchange Act filing) containing the consent. This can also be done using an exhibits-only PE, which becomes effective immediately under Rule 462(d), or, for WKSIs, through a PE of the WKSI shelf, which becomes effective immediately under Rule 462(e).

Stay tuned for our next installment, a quick survey of consents and credit ratings.