The exchange demands that all companies listed on it have a robust internal audit function.
The NASDAQ Stock Market has floated a proposed rule change that would require all companies listed on the exchange to have an internal audit function. The Securities and Exchange Commission listed the proposal in the Federal Register on March 8. It will have a short comment period, ending March 29.
Most NASDAQ companies will already have an internal audit function, or at least they will outsource it to a third party. However, some early stage companies – the sort that flock to NASDAQ – may not. The SEC, under the Dodd Frank Act, requires all registered financial advisors, including hedge funds, to have an internal audit function. The NASDAQ rule will close the gap further.
NASDAQ said that it proposed the rule, “To ensure that listed companies have a mechanism in place to regularly review and assess their system of internal control and, thereby, to identify any weaknesses and develop appropriate remedial measures. The rule is also intended to make sure that the listed company’s management and audit committee are provided with ongoing information about risk management processes and the system of internal control.”
Click here to see rule as it appears in the Federal Register