To establish a Federal Bureau of Audits within the Securities and Exchange Commission to conduct audits of all publicly registered companies.

SECTION 1. SHORT TITLE.

    This Act may be cited as the ``Investor, Shareholder, and Employee 
Protection Act of 2002''.

SEC. 2. FINDINGS.

    The Congress finds the following:
            (1) The failure of accounting firms to provide accurate 
        audits of its clients is not a new or isolated problem.
            (2) Accounting firms have been implicated in failed audits 
        that have cost investors billions of dollars when earnings 
        restatements sent stock prices tumbling.
            (3) Auditors have an inherent conflict of interest. They 
        are hired, and fired, by their audit clients.
            (4) This conflict of interest pressures auditors to sign 
        off on substandard financial statements rather than risk losing 
        a large client.
            (5) Auditing a public company for the benefit of small as 
        well as large investors requires independence.
            (6) Therefore the only truly independent audit is one by a 
        governmental agency.
            (7) The Federal Bureau of Audits, closely regulated by the 
        Commission, will provide honest audits of all publicly traded 
        companies.

SEC. 3. ESTABLISHMENT OF BUREAU.

    (a) Establishment.--There is hereby established within the 
Commission an independent regulatory agency to be known as the Federal 
Bureau of Audits.
    (b) Function of the Bureau.--The Bureau shall conduct an annual 
audit of the financial statements that are required to be submitted by 
reporting issuers and to be certified under the securities laws or the 
rules or regulations thereunder.
    (c) Officers.--
            (1) Bureau head.--The head of the Bureau shall be a 
        Director, who shall be appointed by the President, by and with 
        the advice and consent of the Senate.
            (2) Additional officers.--There shall also be in the Bureau 
        a Deputy Director and an Inspector General, each of whom shall 
        be appointed by the President, by and with the advice and 
        consent of the Senate.
            (3) Terms.--The Director, Deputy Director, and Inspector 
        General shall be appointed for terms of 12 years, except that--
                    (A) the first term of office of the Deputy Director 
                shall be eight years; and
                    (B) the first term of office of the Inspector 
                General shall be 4 years.
    (d) Independence.--Except as provided in sections 4 and 5, in the 
performance of their functions, the officers, employees, or other 
personnel of the Bureau shall not be responsible to or subject to the 
supervision or direction of any officer, employee, or agent of any 
other part of the Commission.
    (e) Administrative Support.--The Commission shall provide to the 
Bureau such support and facilities as the Director determines it needs 
to carry out its functions.
    (f) Rules.--The Bureau is authorized to establish such procedural 
and administrative rules as are necessary to the exercise of its 
functions, but the Bureau may not establish any auditing standards 
within the jurisdiction of the Commission under sections 4 and 5.
    (g) Additional Authority.--In carrying out any of its functions, 
the Bureau shall have the power to hold hearings, sign and issue 
subpoenas, administer oaths, examine witnesses, and receive evidence at 
any place in the United States it may designate. The Bureau may, by one 
or more of its officers or by such agents as it may designate, conduct 
any hearing or other inquiry necessary or appropriate to its functions, 
except that nothing in this subsection shall be deemed to supersede the 
provisions of section 556 of title 5, United States Code relating to 
hearing examiners.
    (h) Conflict of Interest Provisions.--A person previously employed 
by the Bureau may not accept employment or compensation from an issuer 
audited by the Bureau or an accountant that provides audit related 
services to an issuer audited by the Bureau for 10 years after the last 
day of employment at the Bureau. Any current employee of the Bureau 
shall be required to place all investments in a blind trust, in 
accordance with regulations prescribed by the Commission. The employees 
of the Bureau who conduct the audits shall be exempt from the civil 
service pay system under section 4802 of title 5, United States Code, 
and shall be paid salaries that are competitive with similar private 
sector employment.
    (i) Legal Representation.--Except as provided in section 518 of 
title 28, United States Code, relating to litigation before the Supreme 
Court, attorneys designated by the Director of the Bureau may appear 
for, and represent the Bureau in, any civil action brought in 
connection with any function carried out by the Bureau pursuant to this 
Act or as otherwise authorized by law.

SEC. 4. ASSUMPTION OF AUTHORITY BY COMMISSION OVER AUDITING STANDARDS.

    (a) Assumption of Authority.--Pursuant to its authority under the 
securities laws to require the certification, in accordance with the 
rules of the Commission, of financial statements and other documents of 
reporting issuers of securities, the Commission shall, by rule, 
establish and revise as necessary auditing standards for audits of such 
financial statements.
    (b) Incorporation of Current Standards.--In adopting auditing 
standards under this section, the Commission shall incorporate 
generally accepted auditing standards in effect on the date of 
enactment of this Act, with such modifications as the Commission 
determines are necessary and appropriate in the public interest and for 
the protection of investors.
    (c) Additional Requirements for Rules.--The rules prescribed by the 
Commission under subsection (a)--
            (1) shall be available for public comment for not less than 
        90 days;
            (2) shall be prescribed not less than 180 days after the 
        date of enactment of this Act; and
            (3) shall be effective on the first January 1 that occurs 
        after the end of such 180 days.

SEC. 5. FEES FOR THE RECOVERY OF COSTS OF OPERATIONS.

    (a) In General.--The Commission shall in accordance with this 
section assess and collect a fee on each reporting issuer whose 
financial statements are audited by the Bureau. This section applies as 
of the first fiscal year that begins after the date of enactment of 
this Act (referred to in this section as the ``first applicable fiscal 
year'').
    (b) Total Fee Revenues; Individual Fee Amounts.--The total fee 
revenues collected under subsection (a) for a fiscal year shall be the 
amounts appropriated under subsection (d)(2) for such fiscal year. 
Individual fees shall be assessed by the Commission on the basis of an 
estimate by the Commission of the amount necessary to ensure that the 
sum of the fees collected for such fiscal year equals the amount so 
appropriated.
    (c) Fee Waiver or Reduction.--The Commission shall grant a waiver 
from or a reduction of a fee assessed under subsection (a) if the 
Commission finds that the fee to be paid will exceed the anticipated 
present and future costs of the operations of the Bureau.
    (d) Crediting and Availability of Fees.--
            (1) In general.--Fees collected for a fiscal year pursuant 
        to subsection (a) shall be credited to the appropriation 
        account for salaries and expenses of the Bureau and shall be 
        available until expended without fiscal year limitation.
            (2) Appropriations.--
                    (A) First fiscal year.--For the first applicable 
                fiscal year, there shall be available for the salaries 
                and expenses of the Bureau $5,150,000,000.
                    (B) Subsequent fiscal years.--For each of the four 
                fiscal years following the first applicable fiscal 
                year, there shall be available for the salaries and 
                expenses of the Bureau an amount equal to the amount 
                made available by paragraph (1) for the first 
                applicable fiscal year, multiplied by the adjustment 
                factor for such fiscal year (as defined in subsection 
                (f)).
    (e) Collection of Unpaid Fees.--In any case where the Commission 
does not receive payment of a fee assessed under subsection (a) within 
30 days after it is due, such fee shall be treated as a claim of the 
United States Government subject to subchapter II of chapter 37 of 
title 31, United States Code.
    (f) Definition of Adjustment Factor.--For purposes of this section, 
the term ``adjustment factor'' applicable to a fiscal year is the lower 
of--
            (1) the Consumer Price Index for all urban consumers (all 
        items; United States city average) for April of the preceding 
        fiscal year divided by such Index for April of the first 
        applicable fiscal year; or
            (2) the total of discretionary budget authority provided 
        for programs in categories other than the defense category for 
        the immediately preceding fiscal year (as reported in the 
        Office of Management and Budget sequestration preview report, 
        if available, required under section 254(c) of the Balanced 
        Budget and Emergency Deficit Control Act of 1985) divided by 
        such budget authority for the first applicable fiscal year (as 
        reported in the Office of Management and Budget final 
        sequestration report submitted for such year).
For purposes of this subsection, the terms ``budget authority'' and 
``category'' have the meaning given such terms in the Balanced Budget 
and Emergency Deficit Control Act of 1985.''.

SEC. 5. DEFINITIONS.

    As used in this Act:
            (1) Commission.--The term ``Commission'' means the 
        Securities and Exchange Commission.
            (2) Securities laws.--The term ``securities laws'' means 
        the Securities Act of 1933 (15 U.S.C. 77a et seq.), the 
        Securities Exchange Act of 1934 (15 U.S.C. 78a et seq.), the 
        Trust Indenture Act of 1939 (15 U.S.C. 77aaa et seq.), the 
        Investment Company Act of 1940 (15 U.S.C. 80a-1 et seq.), the 
        Investment Advisers Act of 1940 (15 U.S.C. 80b et seq.), and 
        the Securities Investor Protection Act of 1970 (15 U.S.C. 78aaa 
        et seq.).
            (3) Reporting issuer.--The term ``reporting issuer'' means 
        any registrant under section 12 of the Securities Exchange Act 
        of 1934 (15 U.S.C. 78l) or any other issuer required to file 
        periodic reports under section 13 or 15 of such Act (15 U.S.C. 
        78m, 78o).

Summary: Investor, Shareholder, and Employee Protection Act of 2002 - Establishes within the Securities and Exchange Commission (SEC) an independent regulatory agency to be known as the Federal Bureau of Audits, which shall conduct an annual audit of the financial statements submitted to the SEC by reporting issuers. Requires the President to appoint the Director of the Bureau, by and with the advice and consent of the Senate. Declares that officers, employees, and other Bureau personnel shall not be responsible to or subject to the supervision or direction of Commission personnel. Prohibits Bureau employees from receiving employment or compensation from an issuer audited by the Bureau, or any accountant that provides audit-related services to a Bureau-audited issuer, for ten years after employment with the Bureau. Requires the SEC to establish standards for such audits, incorporating generally accepted auditing standards in effect on the enactment of this Act, with any necessary and appropriate modifications. Directs the SEC to assess and collect a fee from each reporting issuer whose financial statements are audited by the Bureau.