Are we sure audits aren’t important in biotech?

The SEC is advancing a rule change that would allow small public companies to forgo regular audits. The agency’s chairman said he had biotech in mind with the proposal, arguing that, free from the costs of external auditing, drug developers could “redirect the savings into growing their companies by investing in research and human capital.”

The timing is a little curious, what with Theranos being the subject of an ever-expanding number of movies.

Theranos’s private investors famously never asked for an audit of its financials. If the SEC’s proposed rule had been in place at the time, the company could have gone public without letting outsiders look at its books. Then the victims of its alleged fraud would go beyond the Tim Drapers of the world and include the millions of people whose retirements are dependent on publicly traded stocks.

“While paying auditors isn’t free, neither is fraud,” said SEC Commissioner Robert Jackson, the only member of the agency's four-person leadership to vote against the proposal.