March 26, 2013
File previously sent was not accepted. I have therefore repeated the text here:
Subject: File No. SR-NASDAQ-2013-032
From: Simon J Parker
March 26, 2013
I am the Head of Business Assurance at Innospec Inc. (NASDAQ: IOSP) and would like to comment on proposed rule 34-69030 (SR-NASDAQ-2013-032) requiring all NASDAQ listed companies to have an internal audit function.
Establishing, implementing and embedding effective risk and control elements of an overall corporate governance framework are of fundamental importance to all organizations. Audit Committees need assurance not only from management, but also independently, that good internal controls are in place and are operating effectively. Internal Audit can not only provide this assurance, it can also be a catalyst for change and improvement within the organization.
Although it is possible for an Audit Committee to gain sufficient assurance on risk, control and governance from other assurance activities within the organization, or from its external auditors, this may be a complex and time consuming process. Furthermore, independent opinions carry more weight although it is important to note that independence has a different meaning for internal audit than it does for external audit.
The Board and Audit Committee must be in a position to demonstrate that the assurance it is receiving is sufficient. An internal audit function is the optimum method of achieving this. Effective planning and coordination with other compliance activities within the organization can ensure that costs are contained. Within Innospec Inc. the costs of maintaining an audit function fall well below 1% of operating expenses. The use of co-sourcing arrangements can also provide flexibility in terms of resource and technical expertise available.
The proposal that the Audit Committee should discuss with the outside auditor the responsibilities of the internal audit function is something that I concur with. However, I would encourage caution in extending this discussion to budget and staffing, as this responsibility sits firmly with the Audit Committee.
In conclusion, I believe the proposed rule requiring an internal audit function is a good move that would send a very strong and positive message to investors.