Consents to the Use of Audit Reports

1. Registrants must file a copy of the auditor's consent to the use of its report in any filing under the Securities Act as an exhibit. The primary purpose of obtaining

consent is to assure that the auditor is aware of the use of its report and the context in which it is used.

2. A new consent is required:

• whenever any change, other than typographical, is made to the financial statements

• for an amendment if there have been intervening events since the prior filing that are material to the company

• with an amendment if an extended period of time passes since the last filing. An extended time is generally any period which is more than 30 days. Many firms require their clients to obtain a new consent each time an amendment is filed.

3. Exchange Act reports

a) Filing of a consent to the use of an audit report is not required in Exchange Act reports. Ordinarily, an auditor's engagement letter with the registrant will require the registrant to inform the auditor prior to each occasion that the report is filed with the Commission. Audit reports included in Exchange Act filings are required to be signed.

b) An amendment to a previously filed Exchange Act filing may require the reissuance of the auditor's report. In other circumstances, it may be sufficient to include a manually signed report or consent that affirms that the originally filed report applies to the financial statements and/or schedules as revised in the amendment.

4. Waivers [SAB 1A and SAB 1L]

a) In rare circumstances, such as situations involving hostile takeover attempts, a consent may be waived if the registrant applies for a waiver and provides an affidavit complying with Rule 437 of Regulation C.

b) Hostile takeovers

A registrant offering its own securities in a hostile exchange offer for a target’s stock may seek and not be able to obtain the target’s cooperation in providing either its audited financial statements or the target auditor’s consent to the use of its report in the required registration statement. The

acquirer/registrant should use its best efforts to obtain the target’s permission and cooperation for the filing or incorporation by reference of the target’s financial statements and the target auditor’s consent to the inclusion of its report on the financial statements. At a minimum, a registrant is expected to write to the target requesting these items and to allow a reasonable amount of time for a response prior to effectiveness of the filing. The target may, however, fail to cooperate with the registrant.

If a registrant uses its best efforts but is unsuccessful in obtaining the target’s permission and cooperation for the filing or incorporation by reference of its financial statements and its auditor’s consent to the inclusion of its report on the financial statements, the registrant may request a waiver of the consent. The affidavit included in the request should document the specific actions taken by the registrant to obtain the cooperation of the other party for the filing as well as the efforts to obtain the auditor’s consent. Correspondence evidencing the registrant’s request for these items should accompany the affidavit.

The staff will generally agree to waive the requirement to include or incorporate by reference the target auditor’s audit report. In that situation, disclosure should be made that, although an audit report was issued on the target’s financial statements and is included in the target’s filings, the auditor has not permitted use of its report in the registrant’s registration statement. The auditor should not be named. Any legal or practical implication for shareholders of the registrant and the target resulting from the inability to obtain the cooperation of the target or consent of the target’s auditor should be explained. No disclosure in the registration statement should expressly or implicitly disclaim the registrant’s liability for the target’s financial

statements. In the event that circumstances change, the registration statement should be amended to include the audited financial statements and the

auditor’s consent required by the form.

5. The consent of the independent accountant is not required for a report on financial statements which is not a part of a 1933 Act registration statement under Rule 412(c) of Regulation C, like superseded financial statements.

The staff has not objected to a modified consent language indicating that the independent accountant's report on financial statements previously filed on Form 10-K and incorporated by reference in Form S-3 is no longer appropriate since

restated financial statements have been presented giving effect to a business

combination accounted for as a pooling-of-interests. This language is only appropriate where the pooling-of-interest combination is consummated and the financial statements have been restated as a result of the publication of post- combination financial statements. That is, this does not apply to supplemental financial statements.