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NASDAQ withdraws proposed rule change requiring listed companies to have an internal audit function

INSIGHT ARTICLE  | 

Update: According to the Nasdaq OMX Group, NASDAQ has decided to withdraw its proposal to require listed companies to have an internal audit function. The decision was made based upon comments made by the issuer community and others. The intent is to revise the proposed rule, taking into account the comments, and resubmit it at a later date.

On March 4, 2013, NASDAQ filed a proposed rule change with the SEC requiring listed companies have an internal audit function. The proposal calls for listed companies to:

"…Establish and maintain an internal audit function to provide management and the audit committee with ongoing assessments of the Company’s risk management processes and system of internal control. The Company may choose to outsource this function to a third-party service provider other than its independent auditor."

5645. Internal Audit Function, SECURITIES AND EXCHANGE COMMISSION (Release No. 34-69030; File No. SR-NASDAQ-2013-032)

According to the release, the proposed rule change requested by NASDAQ would ensure that listed companies have a mechanism by which to review and assess their internal controls and both identify and remediate areas of weakness, and permits companies to outsource their internal audit function. It also intends to make sure an organization’s management and audit committee are regularly informed as to the risk management processes and system of internal control.

View the full text of the SEC release on this proposal.

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