Because you are aiming for $2,500,000, the SEC requires Audited Financial Statements. This is a significantly higher bar than the “Reviewed” statements used for smaller raises. An audit provides “reasonable assurance” that your books are free of material misstatement, whereas a review only provides “limited assurance.”
Here is the 2026 Due Diligence Checklist to prepare Atlas Water Corp for a PCAOB-standard audit.
1. Corporate Governance & Legal
The auditors need to verify that Atlas Water Corp actually owns what it says it owns.
- [ ] Articles of Incorporation & Bylaws: Ensure all amendments are captured.
- [ ] Cap Table (the “Carta” or “AngelList” export): A clean list of every shareholder, option holder, and convertible note holder.
- [ ] Material Contracts: Copies of any contract over ~$25k (e.g., manufacturing agreements, office leases, or major customer LOIs).
- [ ] Board Minutes: Documentation of all major corporate decisions for the last two years.
2. Revenue & Asset Verification (The “Water Tech” Focus)
Since you are a hardware/tech company, the auditors will “drill down” into your physical and intellectual property.
- [ ] Inventory Count: If you have units in a warehouse, the CPA may physically show up to count them or request a “blind count” report.
- [ ] Revenue Recognition Policy: Documents showing when you book a sale. (Is it when the water filter ships? Or when it’s installed and running?)
- [ ] Fixed Asset Ledger: A list of all equipment (CNC machines, testing rigs, vehicles) including purchase date, cost, and depreciation.
- [ ] IP Documentation: Proof of patent filings or trademark registrations for “Atlas Water.”
3. Financial Transaction Testing
The “meat” of the audit involves the CPA tracing your numbers back to the source.
- [ ] Bank Statements: All 12 months of statements for every business account.
- [ ] General Ledger (GL): An export from QuickBooks/Xero showing every single transaction for the last two fiscal years.
- [ ] Accounts Payable/Receivable (AP/AR): An “Aging Report” showing who owes you money and who you owe.
- [ ] Payroll Records: Verification of employee salaries and 1099 contractor payments (Form W-2 and Form 1099-NEC summaries).
4. Specific 2026 SEC Requirements
- [ ] Related Party Transactions: Disclosure of any time the company paid the Founder/CEO or their family members (e.g., “The CEO owns the building the company rents”).
- [ ] Subsequent Events: A memo detailing any major changes that happened after your last fiscal year ended (e.g., “We signed a $500k deal in February 2026”).
- [ ] Internal Controls Memo: A brief description of who has the “keys to the kingdom”—who can sign checks and who approves expenses?
The Audit Timeline (Estimates for 2026)
- Phase 1: Preparation (2 weeks): You gather all the documents in this checklist.
- Phase 2: Fieldwork (3–4 weeks): The CPA asks 1,000 questions and tests your transactions.
- Phase 3: Final Review (1 week): The CPA firm’s partner signs off on the “Audit Opinion.”
- Phase 4: Filing: You attach the Audit Opinion to your Form C and launch on your portal.
Pro-Tip: Don’t wait until the audit is done to talk to a Funding Portal. Most portals (Wefunder, StartEngine, etc.) will let you start “testing the waters” while the audit is in progress so you can build a waitlist of investors.
Would you like me to draft a “Management Representation Letter”? (This is a standard letter your CPA will eventually ask you to sign, stating that you haven’t hidden any “skeletons in the closet” from them).