Equity Crowdfunding Accounting

As a general enthusiast of business, I can't wait to see equity crowdfunding become reality.  I think it's good for business and will be good for the economy.  Working with startups, small businesses and SEC reporting companies for over a decade I know the value and excitement of innovation. But I'm also curious about the quality of equity crowdfunding accounting on the new requirements from Regulation Crowdfunding.With the elimination of the audit requirement at the $500K - $1M level for first time crowdfunding companies, I think we will see lots of bad financial information being presented, which is scary when you think about investing your hard-earned money.  The question then becomes; how is an investor to know if information is accurate?Out of the hundreds of businesses I've worked with, I now of maybe a handful that have gotten everything 100% right the very first time they had to report information.  Sometimes the errors are small, for example a timing issue on accounts payable.  Sometimes those errors are big, for example not accounting for the fair value of millions of shares issued to employees and consultants. The problem is, if you don't know the issues and accounting behind them, you don't know what to look for.This is why the SEC has required Regulation Crowdfunding companies to have an independent CPA firm review the financial information. A review generally includes an assessment of accounting policies, analytical review and limited substantive testing.Crowdfunding companies will look at the review as an insurance policy, but they shouldn't.  a CPA review can only be as good as the information that goes into that review.  Ultimately, the business owner, founder, CEO, CFO, etc... is responsible for the numbers presented to investors. A crowdfunding company cannot defend themselves by saying "we didn't know", "we relied on the auditor", etc... That is why retaining a financial expert to assist in the financial reporting is so important.In my next blog I'll detail some of the most prevalent accounting issues I suspect we will see as equity crowdfunding becomes a reality.This article was written by David Gosselin, Partner at BizCFO and Principal at dbbmckennon a PCAOB registered CPA firm.  With over a decade of experience working with SEC reporting companies, David has been a leader among CPA’s in the Regulation A+ and equity crowdfunding industries and is a financial expert in the requirements of both regulations.