March 18, 2013
I am not in favor of the proposed rule change requiring NASDAQ listed companies to have an internal audit function. I think NASDAQ is the listing site of choice for small or growth stage companies. Investor capital for these companies is critical to advance new ideas or science. By adding additional requirements on these companies, like a required internal audit function, you are syphoning off capital that is needed to create real "business value". Most listed companies today already have to adhere to the 404 section of the Sarbanes Oxley Act which requires the company to have documented its' system of internal controls. The company's external auditor is then required to evaluate risk, test and attest as to the effectiveness of internal controls on an annual basis. This process alone is expensive and time consuming for small companies. Costs to prepare for this review,not including internal staff time, are$100k and then we have fees of $500k for our external auditor. I believe the SOX 404 requirement addresses the risk managment concerns raised by the SEC without further burdening small companies.