The NASDAQ Stock Market LLC (Nasdaq) recently proposed a rule change to require listed companies to establish and maintain an internal audit function. Of course, many listed companies already have an internal audit function as a matter of best practice. NYSE listed companies have been required to maintain an internal audit function since 2004.
The purpose of the internal audit function is to ensure that management and the audit committee receive information about their company’s risk management processes and internal control system. Companies would be permitted to outsource the internal audit function to a third party service provider other than their independent auditor. The audit committee would have sole, non-delegable responsibility to assist the board in overseeing the internal audit function.
If the rule change is approved by the SEC, companies listed on Nasdaq on or prior to June 30, 2013, would be required to have an internal audit function no later than December 31, 2013. Companies listing on Nasdaq after June 30, 2013, would be required to have an internal audit function prior to listing.