Under Regulation D, you only strictly require a CPA audited financial statement if you take a specific action: including non-accredited investors in a Rule 506(b) offering.
The financial audit requirement acts as a trigger based on the types of investors you accept, rather than the rule itself:
1. Rule 506(b) — The "Trigger" Exemption
- Accredited-Only Raise: If you only accept accredited investors under 506(b), no CPA audit is legally required by the SEC (though many institutional investors or funds might still request one for transparency).
- Including Non-Accredited Investors: If you choose to exercise your right to include up to 35 non-accredited (but sophisticated) investors, the SEC strictly requires you to provide them with robust disclosure documents. Part of this disclosure package includes financial statements prepared in accordance with US GAAP that must be certified or audited by an independent CPA.
2. Rule 506(c) — No Audit Required
Because Rule 506(c) explicitly bans non-accredited investors from participating altogether, the SEC does not mandate audited financial statements for these offerings.
Note: While you don't need a CPA to audit your company's financials for a 506(c) raise, many issuers utilize a CPA for a different reason: to sign a third-party accredited investor verification letter for their investors, which satisfies the SEC's requirement to verify investor wealth.
3. Rule 504 — No Audit Required
Rule 504 (raises up to $10 million) does not carry a federal SEC mandate for audited financial statements, though you must still comply with individual state "Blue Sky" laws, which occasionally have their own specific state-level accounting rules.
The Startup Reality Check
If you are a brand new, early-stage company or a real estate syndicate just launching a Rule 506(b) raise, you might wonder: "How do I audit something that has no history?"
If your entity is newly formed and has zero material financial activity or history, you generally won't have to provide a multi-year audit, but you must explicitly state that absence in writing to your investors. However, the moment your company finishes its first fiscal year or handles meaningful investor capital, a CPA audit becomes completely non-negotiable if non-accredited investors are involved.
Because of this costly and complex hurdle, the vast majority of companies structure their Reg D offerings to be 100% accredited-only to avoid the CPA audit mandate entirely.