H. R. 3763—10
(B) the annual fees received by the firm from each
such issuer for audit services, other accounting services,
and non-audit services, respectively;
(C) such other current financial information for the
most recently completed fiscal year of the firm as the
Board may reasonably request;
(D) a statement of the quality control policies of the
firm for its accounting and auditing practices;
(E) a list of all accountants associated with the firm
who participate in or contribute to the preparation of audit
reports, stating the license or certification number of each
such person, as well as the State license numbers of the
firm itself;
(F) information relating to criminal, civil, or adminis-
trative actions or disciplinary proceedings pending against
the firm or any associated person of the firm in connection
with any audit report;
(G) copies of any periodic or annual disclosure filed
by an issuer with the Commission during the immediately
preceding calendar year which discloses accounting dis-
agreements between such issuer and the firm in connection
with an audit report furnished or prepared by the firm
for such issuer; and
(H) such other information as the rules of the Board
or the Commission shall specify as necessary or appropriate
in the public interest or for the protection of investors.
(3) CONSENTS.—Each application for registration under this
subsection shall include—
(A) a consent executed by the public accounting firm
to cooperation in and compliance with any request for
testimony or the production of documents made by the
Board in the furtherance of its authority and responsibil-
ities under this title (and an agreement to secure and
enforce similar consents from each of the associated persons
of the public accounting firm as a condition of their contin-
ued employment by or other association with such firm);
and
(B) a statement that such firm understands and agrees
that cooperation and compliance, as described in the con-
sent required by subparagraph (A), and the securing and
enforcement of such consents from its associated persons,
in accordance with the rules of the Board, shall be a
condition to the continuing effectiveness of the registration
of the firm with the Board.
(c) ACTION ON APPLICATIONS.—
(1) TIMING.—The Board shall approve a completed applica-
tion for registration not later than 45 days after the date
of receipt of the application, in accordance with the rules of
the Board, unless the Board, prior to such date, issues a written
notice of disapproval to, or requests more information from,
the prospective registrant.
(2) TREATMENT.—A written notice of disapproval of a com-
pleted application under paragraph (1) for registration shall
be treated as a disciplinary sanction for purposes of sections
105(d) and 107(c).
(d) PERIODIC REPORTS.—Each registered public accounting firm
shall submit an annual report to the Board, and may be required
H. R. 3763—11
to report more frequently, as necessary to update the information
contained in its application for registration under this section, and
to provide to the Board such additional information as the Board
or the Commission may specify, in accordance with subsection (b)(2).
(e) PUBLIC AVAILABILITY.—Registration applications and annual
reports required by this subsection, or such portions of such applica-
tions or reports as may be designated under rules of the Board,
shall be made available for public inspection, subject to rules of
the Board or the Commission, and to applicable laws relating to
the confidentiality of proprietary, personal, or other information
contained in such applications or reports, provided that, in all
events, the Board shall protect from public disclosure information
reasonably identified by the subject accounting firm as proprietary
information.
(f) REGISTRATION AND ANNUAL FEES.—The Board shall assess
and collect a registration fee and an annual fee from each registered
public accounting firm, in amounts that are sufficient to recover
the costs of processing and reviewing applications and annual
reports.
SEC. 103. AUDITING, QUALITY CONTROL, AND INDEPENDENCE STAND-
ARDS AND RULES.
(a) AUDITING, QUALITY CONTROL, AND ETHICS STANDARDS.—
(1) IN
GENERAL.—The Board shall, by rule, establish,
including, to the extent it determines appropriate, through
adoption of standards proposed by 1 or more professional groups
of accountants designated pursuant to paragraph (3)(A) or
advisory groups convened pursuant to paragraph (4), and
amend or otherwise modify or alter, such auditing and related
attestation standards, such quality control standards, and such
ethics standards to be used by registered public accounting
firms in the preparation and issuance of audit reports, as
required by this Act or the rules of the Commission, or as
may be necessary or appropriate in the public interest or for
the protection of investors.
(2) RULE REQUIREMENTS.—In carrying out paragraph (1),
the Board—
(A) shall include in the auditing standards that it
adopts, requirements that each registered public accounting
firm shall—
(i) prepare, and maintain for a period of not less
than 7 years, audit work papers, and other information
related to any audit report, in sufficient detail to sup-
port the conclusions reached in such report;
(ii) provide a concurring or second partner review
and approval of such audit report (and other related
information), and concurring approval in its issuance,
by a qualified person (as prescribed by the Board)
associated with the public accounting firm, other than
the person in charge of the audit, or by an independent
reviewer (as prescribed by the Board); and
(iii) describe in each audit report the scope of
the auditor’s testing of the internal control structure
and procedures of the issuer, required by section
404(b), and present (in such report or in a separate
report)—
H. R. 3763—12
(I) the findings of the auditor from such
testing;
(II) an evaluation of whether such internal
control structure and procedures—
(aa) include maintenance of records that
in reasonable detail accurately and fairly
reflect the transactions and dispositions of the
assets of the issuer;
(bb) provide reasonable assurance that
transactions are recorded as necessary to
permit preparation of financial statements in
accordance with generally accepted accounting
principles, and that receipts and expenditures
of the issuer are being made only in accord-
ance with authorizations of management and
directors of the issuer; and
(III) a description, at a minimum, of material
weaknesses in such internal controls, and of any
material noncompliance found on the basis of such
testing.
(B) shall include, in the quality control standards that
it adopts with respect to the issuance of audit reports,
requirements for every registered public accounting firm
relating to—
(i) monitoring of professional ethics and independ-
ence from issuers on behalf of which the firm issues
audit reports;
(ii) consultation within such firm on accounting
and auditing questions;
(iii) supervision of audit work;
(iv) hiring, professional development, and advance-
ment of personnel;
(v) the acceptance and continuation of engage-
ments;
(vi) internal inspection; and
(vii) such other requirements as the Board may
prescribe, subject to subsection (a)(1).
(3) AUTHORITY TO ADOPT OTHER STANDARDS.—
(A) IN GENERAL.—In carrying out this subsection, the
Board—
(i) may adopt as its rules, subject to the terms
of section 107, any portion of any statement of auditing
standards or other professional standards that the
Board determines satisfy the requirements of para-
graph (1), and that were proposed by 1 or more profes-
sional groups of accountants that shall be designated
or recognized by the Board, by rule, for such purpose,
pursuant to this paragraph or 1 or more advisory
groups convened pursuant to paragraph (4); and
(ii) notwithstanding clause (i), shall retain full
authority to modify, supplement, revise, or subse-
quently amend, modify, or repeal, in whole or in part,
any portion of any statement described in clause (i).
(B) INITIAL AND TRANSITIONAL STANDARDS.—The Board
shall adopt standards described in subparagraph (A)(i) as
initial or transitional standards, to the extent the Board
determines necessary, prior to a determination of the
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Commission under section 101(d), and such standards shall
be separately approved by the Commission at the time
of that determination, without regard to the procedures
required by section 107 that otherwise would apply to
the approval of rules of the Board.
(4) ADVISORY
GROUPS.—The Board shall convene, or
authorize its staff to convene, such expert advisory groups
as may be appropriate, which may include practicing account-
ants and other experts, as well as representatives of other
interested groups, subject to such rules as the Board may
prescribe to prevent conflicts of interest, to make recommenda-
tions concerning the content (including proposed drafts) of
auditing, quality control, ethics, independence, or other stand-
ards required to be established under this section.
(b) INDEPENDENCE STANDARDS AND RULES.—The Board shall
establish such rules as may be necessary or appropriate in the
public interest or for the protection of investors, to implement,
or as authorized under, title II of this Act.
(c) COOPERATION WITH DESIGNATED PROFESSIONAL GROUPS OF
ACCOUNTANTS AND ADVISORY GROUPS.—
(1) IN GENERAL.—The Board shall cooperate on an ongoing
basis with professional groups of accountants designated under
subsection (a)(3)(A) and advisory groups convened under sub-
section (a)(4) in the examination of the need for changes in
any standards subject to its authority under subsection (a),
recommend issues for inclusion on the agendas of such des-
ignated professional groups of accountants or advisory groups,
and take such other steps as it deems appropriate to increase
the effectiveness of the standard setting process.
(2) BOARD RESPONSES.—The Board shall respond in a timely
fashion to requests from designated professional groups of
accountants and advisory groups referred to in paragraph (1)
for any changes in standards over which the Board has
authority.
(d) EVALUATION OF STANDARD SETTING PROCESS.—The Board
shall include in the annual report required by section 101(h) the
results of its standard setting responsibilities during the period
to which the report relates, including a discussion of the work
of the Board with any designated professional groups of accountants
and advisory groups described in paragraphs (3)(A) and (4) of sub-
section (a), and its pending issues agenda for future standard setting
projects.
SEC. 104. INSPECTIONS OF REGISTERED PUBLIC ACCOUNTING FIRMS.
(a) IN GENERAL.—The Board shall conduct a continuing pro-
gram of inspections to assess the degree of compliance of each
registered public accounting firm and associated persons of that
firm with this Act, the rules of the Board, the rules of the Commis-
sion, or professional standards, in connection with its performance
of audits, issuance of audit reports, and related matters involving
issuers.
(b) INSPECTION FREQUENCY.—
(1) IN
GENERAL.—Subject to paragraph (2), inspections
required by this section shall be conducted—
(A) annually with respect to each registered public
accounting firm that regularly provides audit reports for
more than 100 issuers; and