H. R. 3763—14
(B) not less frequently than once every 3 years with
respect to each registered public accounting firm that regu-
larly provides audit reports for 100 or fewer issuers.
(2) ADJUSTMENTS TO SCHEDULES.—The Board may, by rule,
adjust the inspection schedules set under paragraph (1) if the
Board finds that different inspection schedules are consistent
with the purposes of this Act, the public interest, and the
protection of investors. The Board may conduct special inspec-
tions at the request of the Commission or upon its own motion.
(c) PROCEDURES.—The Board shall, in each inspection under
this section, and in accordance with its rules for such inspections—
(1) identify any act or practice or omission to act by the
registered public accounting firm, or by any associated person
thereof, revealed by such inspection that may be in violation
of this Act, the rules of the Board, the rules of the Commission,
the firm’s own quality control policies, or professional stand-
ards;
(2) report any such act, practice, or omission, if appropriate,
to the Commission and each appropriate State regulatory
authority; and
(3) begin a formal investigation or take disciplinary action,
if appropriate, with respect to any such violation, in accordance
with this Act and the rules of the Board.
(d) CONDUCT
OF INSPECTIONS.—In conducting an inspection
of a registered public accounting firm under this section, the Board
shall—
(1) inspect and review selected audit and review engage-
ments of the firm (which may include audit engagements that
are the subject of ongoing litigation or other controversy
between the firm and 1 or more third parties), performed at
various offices and by various associated persons of the firm,
as selected by the Board;
(2) evaluate the sufficiency of the quality control system
of the firm, and the manner of the documentation and commu-
nication of that system by the firm; and
(3) perform such other testing of the audit, supervisory,
and quality control procedures of the firm as are necessary
or appropriate in light of the purpose of the inspection and
the responsibilities of the Board.
(e) RECORD RETENTION.—The rules of the Board may require
the retention by registered public accounting firms for inspection
purposes of records whose retention is not otherwise required by
section 103 or the rules issued thereunder.
(f) PROCEDURES FOR REVIEW.—The rules of the Board shall
provide a procedure for the review of and response to a draft
inspection report by the registered public accounting firm under
inspection. The Board shall take such action with respect to such
response as it considers appropriate (including revising the draft
report or continuing or supplementing its inspection activities before
issuing a final report), but the text of any such response, appro-
priately redacted to protect information reasonably identified by
the accounting firm as confidential, shall be attached to and made
part of the inspection report.
(g) REPORT.—A written report of the findings of the Board
for each inspection under this section, subject to subsection (h),
shall be—
H. R. 3763—15
(1) transmitted, in appropriate detail, to the Commission
and each appropriate State regulatory authority, accompanied
by any letter or comments by the Board or the inspector,
and any letter of response from the registered public accounting
firm; and
(2) made available in appropriate detail to the public (sub-
ject to section 105(b)(5)(A), and to the protection of such con-
fidential and proprietary information as the Board may deter-
mine to be appropriate, or as may be required by law), except
that no portions of the inspection report that deal with criti-
cisms of or potential defects in the quality control systems
of the firm under inspection shall be made public if those
criticisms or defects are addressed by the firm, to the satisfac-
tion of the Board, not later than 12 months after the date
of the inspection report.
(h) INTERIM COMMISSION REVIEW.—
(1) REVIEWABLE MATTERS.—A registered public accounting
firm may seek review by the Commission, pursuant to such
rules as the Commission shall promulgate, if the firm—
(A) has provided the Board with a response, pursuant
to rules issued by the Board under subsection (f), to the
substance of particular items in a draft inspection report,
and disagrees with the assessments contained in any final
report prepared by the Board following such response; or
(B) disagrees with the determination of the Board that
criticisms or defects identified in an inspection report have
not been addressed to the satisfaction of the Board within
12 months of the date of the inspection report, for purposes
of subsection (g)(2).
(2) TREATMENT OF REVIEW.—Any decision of the Commis-
sion with respect to a review under paragraph (1) shall not
be reviewable under section 25 of the Securities Exchange
Act of 1934 (15 U.S.C. 78y), or deemed to be ‘‘final agency
action’’ for purposes of section 704 of title 5, United States
Code.
(3) TIMING.—Review under paragraph (1) may be sought
during the 30-day period following the date of the event giving
rise to the review under subparagraph (A) or (B) of paragraph
(1).
SEC. 105. INVESTIGATIONS AND DISCIPLINARY PROCEEDINGS.
(a) IN GENERAL.—The Board shall establish, by rule, subject
to the requirements of this section, fair procedures for the investiga-
tion and disciplining of registered public accounting firms and asso-
ciated persons of such firms.
(b) INVESTIGATIONS.—
(1) AUTHORITY.—In accordance with the rules of the Board,
the Board may conduct an investigation of any act or practice,
or omission to act, by a registered public accounting firm,
any associated person of such firm, or both, that may violate
any provision of this Act, the rules of the Board, the provisions
of the securities laws relating to the preparation and issuance
of audit reports and the obligations and liabilities of account-
ants with respect thereto, including the rules of the Commission
issued under this Act, or professional standards, regardless
of how the act, practice, or omission is brought to the attention
of the Board.
H. R. 3763—16
(2) TESTIMONY AND DOCUMENT PRODUCTION.—In addition
to such other actions as the Board determines to be necessary
or appropriate, the rules of the Board may—
(A) require the testimony of the firm or of any person
associated with a registered public accounting firm, with
respect to any matter that the Board considers relevant
or material to an investigation;
(B) require the production of audit work papers and
any other document or information in the possession of
a registered public accounting firm or any associated person
thereof, wherever domiciled, that the Board considers rel-
evant or material to the investigation, and may inspect
the books and records of such firm or associated person
to verify the accuracy of any documents or information
supplied;
(C) request the testimony of, and production of any
document in the possession of, any other person, including
any client of a registered public accounting firm that the
Board considers relevant or material to an investigation
under this section, with appropriate notice, subject to the
needs of the investigation, as permitted under the rules
of the Board; and
(D) provide for procedures to seek issuance by the
Commission, in a manner established by the Commission,
of a subpoena to require the testimony of, and production
of any document in the possession of, any person, including
any client of a registered public accounting firm, that the
Board considers relevant or material to an investigation
under this section.
(3) NONCOOPERATION WITH INVESTIGATIONS.—
(A) IN GENERAL.—If a registered public accounting firm
or any associated person thereof refuses to testify, produce
documents, or otherwise cooperate with the Board in
connection with an investigation under this section, the
Board may—
(i) suspend or bar such person from being associ-
ated with a registered public accounting firm, or
require the registered public accounting firm to end
such association;
(ii) suspend or revoke the registration of the public
accounting firm; and
(iii) invoke such other lesser sanctions as the Board
considers appropriate, and as specified by rule of the
Board.
(B) PROCEDURE.—Any action taken by the Board under
this paragraph shall be subject to the terms of section
107(c).
(4) COORDINATION AND REFERRAL OF INVESTIGATIONS.—
(A) COORDINATION.—The Board shall notify the
Commission of any pending Board investigation involving
a potential violation of the securities laws, and thereafter
coordinate its work with the work of the Commission’s
Division of Enforcement, as necessary to protect an ongoing
Commission investigation.
(B) REFERRAL.—The Board may refer an investigation
under this section—
(i) to the Commission;
H. R. 3763—17
(ii) to any other Federal functional regulator (as
defined in section 509 of the Gramm-Leach-Bliley Act
(15 U.S.C. 6809)), in the case of an investigation that
concerns an audit report for an institution that is
subject to the jurisdiction of such regulator; and
(iii) at the direction of the Commission, to—
(I) the Attorney General of the United States;
(II) the attorney general of 1 or more States;
and
(III) 
the 
appropriate 
State 
regulatory
authority.
(5) USE OF DOCUMENTS.—
(A) CONFIDENTIALITY.—Except as provided in subpara-
graph (B), all documents and information prepared or
received by or specifically for the Board, and deliberations
of the Board and its employees and agents, in connection
with an inspection under section 104 or with an investiga-
tion under this section, shall be confidential and privileged
as an evidentiary matter (and shall not be subject to civil
discovery or other legal process) in any proceeding in any
Federal or State court or administrative agency, and shall
be exempt from disclosure, in the hands of an agency
or establishment of the Federal Government, under the
Freedom of Information Act (5 U.S.C. 552a), or otherwise,
unless and until presented in connection with a public
proceeding or released in accordance with subsection (c).
(B) AVAILABILITY TO GOVERNMENT AGENCIES.—Without
the loss of its status as confidential and privileged in
the hands of the Board, all information referred to in
subparagraph (A) may—
(i) be made available to the Commission; and
(ii) in the discretion of the Board, when determined
by the Board to be necessary to accomplish the pur-
poses of this Act or to protect investors, be made avail-
able to—
(I) the Attorney General of the United States;
(II) the appropriate Federal functional regu-
lator (as defined in section 509 of the Gramm-
Leach-Bliley Act (15 U.S.C. 6809)), other than the
Commission, with respect to an audit report for
an institution subject to the jurisdiction of such
regulator;
(III) State attorneys general in connection with
any criminal investigation; and
(IV) 
any 
appropriate 
State 
regulatory
authority,
each of which shall maintain such information as confiden-
tial and privileged.
(6) IMMUNITY.—Any employee of the Board engaged in
carrying out an investigation under this Act shall be immune
from any civil liability arising out of such investigation in
the same manner and to the same extent as an employee
of the Federal Government in similar circumstances.
(c) DISCIPLINARY PROCEDURES.—
(1) NOTIFICATION; RECORDKEEPING.—The rules of the Board
shall provide that in any proceeding by the Board to determine
H. R. 3763—18
whether a registered public accounting firm, or an associated
person thereof, should be disciplined, the Board shall—
(A) bring specific charges with respect to the firm
or associated person;
(B) notify such firm or associated person of, and provide
to the firm or associated person an opportunity to defend
against, such charges; and
(C) keep a record of the proceedings.
(2) PUBLIC HEARINGS.—Hearings under this section shall
not be public, unless otherwise ordered by the Board for good
cause shown, with the consent of the parties to such hearing.
(3) SUPPORTING STATEMENT.—A determination by the Board
to impose a sanction under this subsection shall be supported
by a statement setting forth—
(A) each act or practice in which the registered public
accounting firm, or associated person, has engaged (or
omitted to engage), or that forms a basis for all or a
part of such sanction;
(B) the specific provision of this Act, the securities
laws, the rules of the Board, or professional standards
which the Board determines has been violated; and
(C) the sanction imposed, including a justification for
that sanction.
(4) SANCTIONS.—If the Board finds, based on all of the
facts and circumstances, that a registered public accounting
firm or associated person thereof has engaged in any act or
practice, or omitted to act, in violation of this Act, the rules
of the Board, the provisions of the securities laws relating
to the preparation and issuance of audit reports and the obliga-
tions and liabilities of accountants with respect thereto,
including the rules of the Commission issued under this Act,
or professional standards, the Board may impose such discipli-
nary or remedial sanctions as it determines appropriate, subject
to applicable limitations under paragraph (5), including—
(A) temporary suspension or permanent revocation of
registration under this title;
(B) temporary or permanent suspension or bar of a
person from further association with any registered public
accounting firm;
(C) temporary or permanent limitation on the activi-
ties, functions, or operations of such firm or person (other
than in connection with required additional professional
education or training);
(D) a civil money penalty for each such violation, in
an amount equal to—
(i) not more than $100,000 for a natural person
or $2,000,000 for any other person; and
(ii) in any case to which paragraph (5) applies,
not more than $750,000 for a natural person or
$15,000,000 for any other person;
(E) censure;
(F) required additional professional education or
training; or
(G) any other appropriate sanction provided for in the
rules of the Board.
H. R. 3763—19
(5) INTENTIONAL OR OTHER KNOWING CONDUCT.—The sanc-
tions and penalties described in subparagraphs (A) through
(C) and (D)(ii) of paragraph (4) shall only apply to—
(A) intentional or knowing conduct, including reckless
conduct, that results in violation of the applicable statutory,
regulatory, or professional standard; or
(B) repeated instances of negligent conduct, each
resulting in a violation of the applicable statutory, regu-
latory, or professional standard.
(6) FAILURE TO SUPERVISE.—
(A) IN
GENERAL.—The Board may impose sanctions
under this section on a registered accounting firm or upon
the supervisory personnel of such firm, if the Board finds
that—
(i) the firm has failed reasonably to supervise an
associated person, either as required by the rules of
the Board relating to auditing or quality control stand-
ards, or otherwise, with a view to preventing violations
of this Act, the rules of the Board, the provisions
of the securities laws relating to the preparation and
issuance of audit reports and the obligations and liabil-
ities of accountants with respect thereto, including the
rules of the Commission under this Act, or professional
standards; and
(ii) such associated person commits a violation of
this Act, or any of such rules, laws, or standards.
(B) RULE OF CONSTRUCTION.—No associated person of
a registered public accounting firm shall be deemed to
have failed reasonably to supervise any other person for
purposes of subparagraph (A), if—
(i) there have been established in and for that
firm procedures, and a system for applying such proce-
dures, that comply with applicable rules of the Board
and that would reasonably be expected to prevent and
detect any such violation by such associated person;
and
(ii) such person has reasonably discharged the
duties and obligations incumbent upon that person
by reason of such procedures and system, and had
no reasonable cause to believe that such procedures
and system were not being complied with.
(7) EFFECT OF SUSPENSION.—
(A) ASSOCIATION WITH A PUBLIC ACCOUNTING FIRM.—
It shall be unlawful for any person that is suspended
or barred from being associated with a registered public
accounting firm under this subsection willfully to become
or remain associated with any registered public accounting
firm, or for any registered public accounting firm that
knew, or, in the exercise of reasonable care should have
known, of the suspension or bar, to permit such an associa-
tion, without the consent of the Board or the Commission.
(B) ASSOCIATION WITH AN ISSUER.—It shall be unlawful
for any person that is suspended or barred from being
associated with an issuer under this subsection willfully
to become or remain associated with any issuer in an
accountancy or a financial management capacity, and for
any issuer that knew, or in the exercise of reasonable
H. R. 3763—20
care should have known, of such suspension or bar, to
permit such an association, without the consent of the
Board or the Commission.
(d) REPORTING OF SANCTIONS.—
(1) RECIPIENTS.—If the Board imposes a disciplinary sanc-
tion, in accordance with this section, the Board shall report
the sanction to—
(A) the Commission;
(B) any appropriate State regulatory authority or any
foreign accountancy licensing board with which such firm
or person is licensed or certified; and
(C) the public (once any stay on the imposition of
such sanction has been lifted).
(2) CONTENTS.—The information reported under paragraph
(1) shall include—
(A) the name of the sanctioned person;
(B) a description of the sanction and the basis for
its imposition; and
(C) such other information as the Board deems appro-
priate.
(e) STAY OF SANCTIONS.—
(1) IN GENERAL.—Application to the Commission for review,
or the institution by the Commission of review, of any discipli-
nary action of the Board shall operate as a stay of any such
disciplinary action, unless and until the Commission orders
(summarily or after notice and opportunity for hearing on the
question of a stay, which hearing may consist solely of the
submission of affidavits or presentation of oral arguments) that
no such stay shall continue to operate.
(2) EXPEDITED PROCEDURES.—The Commission shall estab-
lish for appropriate cases an expedited procedure for consider-
ation and determination of the question of the duration of
a stay pending review of any disciplinary action of the Board
under this subsection.
SEC. 106. FOREIGN PUBLIC ACCOUNTING FIRMS.
(a) APPLICABILITY TO CERTAIN FOREIGN FIRMS.—
(1) IN GENERAL.—Any foreign public accounting firm that
prepares or furnishes an audit report with respect to any issuer,
shall be subject to this Act and the rules of the Board and
the Commission issued under this Act, in the same manner
and to the same extent as a public accounting firm that is
organized and operates under the laws of the United States
or any State, except that registration pursuant to section 102
shall not by itself provide a basis for subjecting such a foreign
public accounting firm to the jurisdiction of the Federal or
State courts, other than with respect to controversies between
such firms and the Board.
(2) BOARD AUTHORITY.—The Board may, by rule, determine
that a foreign public accounting firm (or a class of such firms)
that does not issue audit reports nonetheless plays such a
substantial role in the preparation and furnishing of such
reports for particular issuers, that it is necessary or appro-
priate, in light of the purposes of this Act and in the public
interest or for the protection of investors, that such firm (or
class of firms) should be treated as a public accounting firm
H. R. 3763—21
(or firms) for purposes of registration under, and oversight
by the Board in accordance with, this title.
(b) PRODUCTION OF AUDIT WORKPAPERS.—
(1) CONSENT
BY
FOREIGN
FIRMS.—If a foreign public
accounting firm issues an opinion or otherwise performs mate-
rial services upon which a registered public accounting firm
relies in issuing all or part of any audit report or any opinion
contained in an audit report, that foreign public accounting
firm shall be deemed to have consented—
(A) to produce its audit workpapers for the Board
or the Commission in connection with any investigation
by either body with respect to that audit report; and
(B) to be subject to the jurisdiction of the courts of
the United States for purposes of enforcement of any
request for production of such workpapers.
(2) CONSENT
BY
DOMESTIC
FIRMS.—A registered public
accounting firm that relies upon the opinion of a foreign public
accounting firm, as described in paragraph (1), shall be
deemed—
(A) to have consented to supplying the audit
workpapers of that foreign public accounting firm in
response to a request for production by the Board or the
Commission; and
(B) to have secured the agreement of that foreign public
accounting firm to such production, as a condition of its
reliance on the opinion of that foreign public accounting
firm.
(c) EXEMPTION AUTHORITY.—The Commission, and the Board,
subject to the approval of the Commission, may, by rule, regulation,
or order, and as the Commission (or Board) determines necessary
or appropriate in the public interest or for the protection of inves-
tors, either unconditionally or upon specified terms and conditions
exempt any foreign public accounting firm, or any class of such
firms, from any provision of this Act or the rules of the Board
or the Commission issued under this Act.
(d) DEFINITION.—In this section, the term ‘‘foreign public
accounting firm’’ means a public accounting firm that is organized
and operates under the laws of a foreign government or political
subdivision thereof.
SEC. 107. COMMISSION OVERSIGHT OF THE BOARD.
(a) GENERAL OVERSIGHT RESPONSIBILITY.—The Commission
shall have oversight and enforcement authority over the Board,
as provided in this Act. The provisions of section 17(a)(1) of the
Securities Exchange Act of 1934 (15 U.S.C. 78q(a)(1)), and of section
17(b)(1) of the Securities Exchange Act of 1934 (15 U.S.C. 78q(b)(1))
shall apply to the Board as fully as if the Board were a ‘‘registered
securities association’’ for purposes of those sections 17(a)(1) and
17(b)(1).
(b) RULES OF THE BOARD.—
(1) DEFINITION.—In this section, the term ‘‘proposed rule’’
means any proposed rule of the Board, and any modification
of any such rule.
(2) PRIOR APPROVAL REQUIRED.—No rule of the Board shall
become effective without prior approval of the Commission in
accordance with this section, other than as provided in section
103(a)(3)(B) with respect to initial or transitional standards.
H. R. 3763—22
(3) APPROVAL
CRITERIA.—The Commission shall approve
a proposed rule, if it finds that the rule is consistent with
the requirements of this Act and the securities laws, or is
necessary or appropriate in the public interest or for the protec-
tion of investors.
(4) PROPOSED RULE PROCEDURES.—The provisions of para-
graphs (1) through (3) of section 19(b) of the Securities
Exchange Act of 1934 (15 U.S.C. 78s(b)) shall govern the pro-
posed rules of the Board, as fully as if the Board were a
‘‘registered securities association’’ for purposes of that section
19(b), except that, for purposes of this paragraph—
(A) the phrase ‘‘consistent with the requirements of
this title and the rules and regulations thereunder
applicable to such organization’’ in section 19(b)(2) of that
Act shall be deemed to read ‘‘consistent with the require-
ments of title I of the Sarbanes-Oxley Act of 2002, and
the rules and regulations issued thereunder applicable to
such organization, or as necessary or appropriate in the
public interest or for the protection of investors’’; and
(B) the phrase ‘‘otherwise in furtherance of the pur-
poses of this title’’ in section 19(b)(3)(C) of that Act shall
be deemed to read ‘‘otherwise in furtherance of the purposes
of title I of the Sarbanes-Oxley Act of 2002’’.
(5) COMMISSION
AUTHORITY
TO
AMEND
RULES
OF
THE
BOARD.—The provisions of section 19(c) of the Securities
Exchange Act of 1934 (15 U.S.C. 78s(c)) shall govern the abroga-
tion, deletion, or addition to portions of the rules of the Board
by the Commission as fully as if the Board were a ‘‘registered
securities association’’ for purposes of that section 19(c), except
that the phrase ‘‘to conform its rules to the requirements of
this title and the rules and regulations thereunder applicable
to such organization, or otherwise in furtherance of the pur-
poses of this title’’ in section 19(c) of that Act shall, for purposes
of this paragraph, be deemed to read ‘‘to assure the fair
administration of the Public Company Accounting Oversight
Board, conform the rules promulgated by that Board to the
requirements of title I of the Sarbanes-Oxley Act of 2002,
or otherwise further the purposes of that Act, the securities
laws, and the rules and regulations thereunder applicable to
that Board’’.
(c) COMMISSION REVIEW OF DISCIPLINARY ACTION TAKEN BY
THE BOARD.—
(1) NOTICE OF SANCTION.—The Board shall promptly file
notice with the Commission of any final sanction on any reg-
istered public accounting firm or on any associated person
thereof, in such form and containing such information as the
Commission, by rule, may prescribe.
(2) REVIEW
OF
SANCTIONS.—The provisions of sections
19(d)(2) and 19(e)(1) of the Securities Exchange Act of 1934
(15 U.S.C. 78s (d)(2) and (e)(1)) shall govern the review by
the Commission of final disciplinary sanctions imposed by the
Board (including sanctions imposed under section 105(b)(3) of
this Act for noncooperation in an investigation of the Board),
as fully as if the Board were a self-regulatory organization
and the Commission were the appropriate regulatory agency
for such organization for purposes of those sections 19(d)(2)
and 19(e)(1), except that, for purposes of this paragraph—