SEC Proposes Scaling Back Auditor Testing of Fraud Safeguards

Most US-listed companies would be exempt from requirements they hire an outside auditor to field test safeguards meant to ensure investors can rely on corporate revenue and asset value disclosures, under an SEC proposal unveiled on Tuesday.

The draft rule targets an Enron-era mandate long reviled by corporate managers, who see it as a costly and burdensome hurdle to taking a company public and staying listed in the US.

Companies still would have to implement internal controls over financial reporting and inform investors how well those guardrails are working. Gaps in those safeguards serve as red flags to investors and ...