SEC Proposed Exempting More Firms From Audit Rules

The SEC proposal would lift the public float threshold for internal control audits to $2 billion.

Updated on Sept. 20, 2026 in Public Companies

SEC Proposed Exempting More Firms From Audit Rules

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Should the government reduce the financial audit requirements for newly public companies?

In May 2026, the SEC published a proposal to exempt an additional 1,700 U.S.-listed companies from internal control audit requirements. This shift would raise the current public float exemption threshold from $700 million to $2 billion.

Why it matters

SEC chair Paul Atkins argued that current audit requirements deter companies from going public due to the associated complexity and expense. The proposal aims to reduce these costs for smaller firms, though it faces opposition from investor groups and the Big Four accounting firms.

The proposal would exclude firms with public floats up to $2 billion from auditor attestation, potentially reducing industry audit fees by $400 million. Affected companies paid a total of $3.8 billion in audit fees during the previous year.

The players

Securities and Exchange Commission

The SEC is a U.S. government agency responsible for protecting investors and maintaining fair, orderly, and efficient markets.

Paul Atkins

Paul Atkins is the chair of the SEC who has advocated for reducing the complexity of public company audit requirements.

Government Accountability Office

The GAO is an independent, nonpartisan agency that investigates how the federal government spends taxpayer dollars.

The details

The SEC plan would also provide a five-year exemption for companies that recently went public. According to the Government Accountability Office, auditor attestation currently adds 13 percent to median audit fees for covered firms.

The Sarbanes-Oxley Act introduced internal control audit requirements in 2002.
The SEC published the rollback proposal in May 2026.
The SEC is expected to issue a decision on the proposal in the coming months.

Market Landscape

This proposal signifies a major pivot in corporate oversight, loosening requirements that have defined public company reporting since 2002. It reflects a broader push to reduce the regulatory burden on smaller public firms to encourage market entry.

For shareholders, this change could reduce corporate administrative expenses, potentially increasing earnings per share for affected firms. However, some investors worry the rollback might reduce the level of financial transparency and internal oversight provided in public filings.

The takeaway

The move suggests a shifting regulatory philosophy that prioritizes reducing the costs of being public over the protective measures mandated two decades ago. Investors should monitor how these firms change their internal control disclosures if the proposal is enacted.