SEC Proposes Scaling Back Auditor Testing of Internal Controls for Most US-Listed Companies

The SEC has proposed a new rule that would exempt most US-listed companies from the requirement to have external auditors test their internal controls over financial reporting. This move aims to reduce the perceived burden and cost associated with going public and maintaining a US listing, a mandate that originated in the Enron era. While companies would still need to implement and report on their internal controls, the direct auditor testing of these fraud safeguards would be significantly scaled back.