If audited financial statements are required in a filing, the audit report should be signed and unrestricted. Generally, the staff will not make a review determination on or commence a review of a filing that does not meet that requirement. In some circumstances, however, a transaction that will occur at or immediately before the effectiveness of a registration statement is retrospectively reflected in the annual financial statements. If the transaction prevents the auditor from expressing an opinion on the financial statements at the time of filing, the staff has accepted the filing of a "draft report" in the form that it will be expressed at effectiveness. Such transactions may include, but are not limited to:

Another transaction where the staff has accepted the filing of a “draft report” in the form that it will be expressed at effectiveness is if there is a component that qualifies as a discontinued operation before an initial registration statement is filed but after the date of the latest balance sheet included in the initial filing. A “to-be-issued” report in this circumstance may be included when:

In these cases, the draft report should be accompanied by a signed preface of the auditor stating that it expects to be in a position to issue the report in the form presented at effectiveness. No registration statement can be declared effective until the preface is removed and the accountant's report finalized.