In this episode Matt Kelly and I take a deep dive into the recently released, Public Company Accounting Oversight Board (PCAOB) semi-annual white paper. The white paper providing general information about certain characteristics of emerging growth companies (EGCs). Matt and I discuss some of the PCAOB's key findings:

• There were 1,951 companies that identified themselves as EGCs in at least one SEC filing since 2012 and have filed audited financial statements with the SEC in the 18 months preceding the measurement date (“EGC filers”). The PCAOB staff observe that the number of EGC filers has grown since the enactment of the Jumpstart Our Business Startups (JOBS) Act, but has stabilized recently.
• There were 742 EGC filers (or 38 percent) that have common equity securities listed on a U.S. national securities exchange (“exchange-listed”). 
• The five most common industries for EGC filers as of November 16, 2016, are pharmaceutical preparations, blank check companies, real estate investment trusts, prepackaged software, and surgical/medical instruments and apparatus.
• Many EGC filers that were not exchange-listed had limited operations. Approximately 50 percent of the non-listed EGC filers reported zero revenue in their most recent filing with audited financial statements and 23 percent of non-listed EGCs that filed periodic reports disclosed that they were shell companies.
• Approximately 51 percent of EGC filers, including 74 percent of those that were not exchange-listed, received an explanatory paragraph in their most recent auditor’s report expressing substantial doubt about the company’s ability to continue as a going concern.
• Among the 1,951 EGC filers, 1,262 provided a management report on internal control over financial reporting in their most recent annual filing. Of those 1,262 companies, approximately 47 percent reported material weaknesses.
• Approximately 96 percent of EGC filers were audited by accounting firms that also audited issuers that are not EGC filers, including 39 percent of EGC filers that were audited by firms that provided audit reports for more than 100 issuers and were required to be inspected on an annual basis by the PCAOB.

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