OUR THOUGHTS ON:

NASDAQ Proposed Rule Requires Internal Audit

Risk Advisory/Internal Audit|Public Companies

By Nicole Saldamarco

As of March 4, 2013, the SEC's Division of Trading and Markets (Division) is soliciting comments regarding NASDAQ's proposed rule change requiring listed companies to have an internal audit function. If approved, NASDAQ requirements would be consistent with those of the NYSE.

The proposed rule allows listed companies to utilize an outsourced internal audit function. However, consistent with NYSE requirements, sole responsibility for overseeing the internal audit function lies with the Audit Committee.

Companies listed on NASDAQ on or before June 30, 2013 would have to establish an internal audit function by December 31, 2013. Companies that list after June 30, 2013 must have an internal audit function in place prior to listing.

Acceptance of the proposed rule will: 

  • Ensure that listed companies have a process in place to review and assess their system of internal control to help identify any weaknesses, on a regular basis.
  • Ensure that the listed company's management and audit committee are informed of ongoing risk management processes, in addition to any weaknesses in the company’s system of internal control.
  • Assist NASDAQ-listed companies' efforts to comply with federal securities laws, including Rules 13a-15 and 15d-15 of the Exchange Act.

The Division is accepting comments on the proposed rule until 21 days after publication in the Federal Register.

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