SEC Proposed Raising Internal Audit Exemption Threshold

Public companies with floats up to $2 billion could see reduced compliance costs under a new SEC proposal.

Updated on Sept. 20, 2026 in Public Companies

Bold flat-color editorial illustration of stacked stone-like geometric blocks in navy and cream, representing institutional regulatory changes. — The SEC has proposed raising the public float threshold for internal audit exemptions to $2 billion, aiming to lower compliance costs for mid-sized firms. AI Illustration. Upload story photo >

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

In May 2026, the SEC proposed raising the public float threshold for internal control audit exemptions from $700 million to $2 billion. This change aims to lower costs for newly public companies by exempting them from auditor attestation requirements for their first five years.

Why it matters

The proposal addresses concerns that strict audit requirements deter smaller companies from entering public markets. By reducing these mandates, regulators hope to simplify operations and curb the high costs associated with compliance.

The SEC proposal would exempt an additional 1,700 companies from auditor attestation, a group that paid $3.8 billion in total audit fees last year. Auditor attestation typically adds 13 percent to median audit fees, contributing to an estimated $400 million in annual costs that could be eliminated.

The players

SEC

The federal agency tasked with regulating US capital markets and enforcing corporate financial disclosure requirements.

Paul Atkins

The SEC chair who has argued that current audit requirements create excessive complexity and expense for companies.

The details

The proposal shifts the compliance burden by raising the float exemption threshold from $700 million to $2 billion and creates a five-year grace period for companies that have recently gone public. By removing the requirement for auditor attestation, companies can avoid the additional 13 percent median fee increase mandated by the Sarbanes-Oxley Act of 2002. While these changes offer relief for mid-sized firms, the Big Four accounting firms and various investor groups have officially opposed the rollback.

2002: Sarbanes-Oxley Act introduced internal control audit requirements.
May 2026: The SEC published the formal rollback proposal.
Coming months: The agency is expected to finalize its decision on the proposal.

Market Landscape

This proposal represents a major shift from the regulatory framework established by the Sarbanes-Oxley Act of 2002, which mandated internal control certifications for all US-listed entities. It directly addresses long-standing complaints about the cost burden of compliance for smaller issuers.

Operators at affected firms should monitor the SEC decision in the coming months to determine if their compliance budgets will see a material reduction. Consult with your audit committee or accounting counsel to assess whether your current public float qualifies for the proposed relief.

The takeaway

The SEC is signaling a potential move to lighten the financial load for mid-sized and newly public companies. Operators should track the final agency vote as a indicator of future audit-related administrative costs.