The US moves to mark the 25th anniversary of the Enron collapse by scaling back Sarbanes-Oxley regulations. The energy giant's 2001 bankruptcy, caused by obscured finances and dodgy accounting, prompted the 2002 law requiring internal controls and auditor sign-off. SEC Chair Paul Atkins, a former SEC member, has long criticized the requirement, arguing auditors test largely irrelevant procedures, jacking up costs.

Successive regulatory tweaks have already reduced the number of US public companies subject to auditor attestation to about half. The new proposal would exempt companies with a public float under $2 billion and new IPOs for their first five years, even for Space X-sized behemoths. The goal, Atkins argues, is to make IPOs great again by lowering the cost of auditor attestation, which he claims is a deterrent to going public.

Currently, the 1,100 large caps remaining subject to the requirement account for 94 per cent of the market by value. Despite the rollback, every company will still be legally required to have strong financial controls and certify as such in shareholder filings. Ideagen Audit Analytics data shows exempted companies have accounted for 60 to 80 per cent of annual restatements in recent years and are more likely to report material weaknesses.

Academic studies cited by the SEC found auditor involvement acts as a catalyst for a more rigorous approach, as weaknesses are more likely to be identified than by management. The costs of auditor attestation are hard to pin down, but a Government Accountability Office report estimates they account for 13 to 19 per cent of the total audit bill. Across the 1,600 or so companies becoming newly exempt, this could represent savings of $400mn to $600mn.

The involvement of an auditor often acts as a catalyst for taking a more rigorous approach.