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Are Auditor Reviews Still Helpful When They’re Optional?

Businesses are permitted to raise up to $1 million through online securities-based crowdfunding without the need for any form of audit in most cases. Despite this, many businesses continue to obtain auditor reviews, a weaker form of auditor attestation. 

Jayanthi Krishnan and Yi Liang found that voluntarily obtaining auditor reviews fulfilled two roles contributing to crowdfunding success: A monitoring role to ensure businesses are not attempting to manipulate their financial statements, and a signaling role allowing businesses to indicate confidence in high future prospects to investors.  

Startups may benefit from considering these research findings when raising public capital through online securities-based crowdfunding.