The Securities and Exchange Commission (SEC) voted last week to ease audit requirements for some small, publicly traded companies, the agency said in a statement Friday (March 13).
The SEC originally considered audit change requirements in May 2019 as part of an initiative to make it easier for companies to file an initial public offering (IPO), Reuters reported. The new changes will reduce compliance costs for public companies for five years that have less than $100 million in revenues and less than $700 million in outstanding shares.
Those firms can now sidestep the process of having an auditor check their internal controls, something implemented in 2002 with the Enron scandal and others.
“A company trying to develop a vaccine for a fast-spreading virus, something that is now on all of our minds, will be able to pour resources and — importantly — management’s time and attention into that effort rather than into obtaining an internal controls audit,” SEC Commissioner Hester Peirce said in the statement.
Joe Schroeder, an accounting professor at Indiana University, said his analysis turned up about 12 businesses that supported the move and were already dealing with accounting problems, according to The Wall Street Journal.
The only dissenting vote was from Allison Lee.
“The final rule rests in part on the unsupported hypothesis that relieving companies of modest additional costs” will encourage more of them to go public, Lee wrote in her dissent. “There just isn’t evidence for this intuition.”
In other SEC news, banks on Wall Street have asked regulators — the SEC, the Commodity Futures Trading Commission and the Financial Industry Regulatory Authority — to waive rules regarding remote trading during the coronavirus pandemic.
Kenneth Bentsen Jr., CEO of the Securities Industry and Financial Markets Association (SIFMA), has been in charge of the industry response to the outbreak. He said talks have taken place to determine how companies could meet compliance rules if trading staff works elsewhere.